Here are some definitions to help you better understand insurance. Although interpretations may vary between insurance companies, these descriptions should provide a basic understanding.

Accident

A sudden, unexpected and unintentional event or happening.

Accounts Receivable Coverage

Pays for your cost to replace or restore your accounts receivable records if they're damaged by fire, windstorm, vandalism or any other covered incident.  It may also provide reimbursement for amounts due from your customers that you are unable to collect, subject to the policy limits.

Actual Cash Value

A method of determining the amount of your property loss which starts with the replacement cost of the property and then subtracts depreciation.

Additional Insured

Advertising Liability

Covers damages assessed against you, and legal fees, if your business is sued by a person or organization claiming your advertising injured them.  Examples include publishing inaccurate information that slanders or libels them; violates their right of privacy; copies their advertising ideas or style of doing business; or infringes on their copyright, title or slogan.

Aggregate Limit

A type of policy limit in liability policies that limits coverage to a specific total amount for all losses that occur during the policy period.

Auto

Defined as a land motor vehicle, trailer or semi-trailer designed for travel on public roads, including attached machinery or equipment, but excluding mobile equipment.

Automatic Sprinkler

A property protection device to prevent damage by fire.  The sprinkler head is made of a substance that melts at a low point and releases a spray of water.

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Bodily Injury Liability

Injury to a person's body (other than the insured or the insured's employee) including the cost of care, loss of services and/or restitution for death resulting from the injury.

Binder

Blanket Insurance

Brands and Label Coverage

Pays the cost of removing the brands and labels from damaged stock so it can be salvaged.

Builder's Risk Coverage

Insures commercial buildings under construction against damage from a fire, windstorm, theft and other exposures.  Coverage also applies to property while in transit and during temporary storage.  This may apply to a single location or may be written to cover multiple locations.

Buildings Coverage

Protection against physical loss or damage to your building and other structures at the building location due to fire and other covered incidents up to the policy limit.

Burglary

Breaking and entering into the premises of another with felonious intent and with visible signs of forced entry.

Business Income Coverage

Reimburses your business for loss of income and the extra expenses of restoring your business operations, such as renting equipment or another office space, if your business has to suspend operation due to damage.

Business Income/Business Interruption/Extra Expense Coverage

Reimburses your business for loss of profits including continuing expenses and the extra expenses of restoring your business operations.  Reimbursement is usually up to a year and covers physical loss or damage to your insured building or personal property caused by a fire and/or other covered incidents up to the policy limit. For example, extra expense could include renting equipment or another office space, if your business has to suspend operation due to damage.

Business Owner's Policy (BOP)

An insurance policy that provides protection for both property (buildings, personal property, business interruption/extra expense) and general liability coverages.

Business Personal Property Coverage

Protection against physical loss or damage to your business' equipment, stock, furniture, fixtures, and/or improvements and betterments caused by a fire and/or other covered incident up to your policy limit.

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Cancellation

The termination of a policy before its specified expiration date.

Catastrophe

An incident or series of related incidents involving a substantial loss of property or causing substantial liability.

Certificate of Insurance

A statement of coverage issued to an interested third party (such as your lessor) that outlines your insurance coverages, limits, insurers, policy numbers and policy term.

Claim

A request for payment of a loss that may come under the terms of an insurance contract.

Claim Expense

Liability coverage includes the investigation and legal expenses incurred by the insurance company and includes expenses you incur at the insurance company's request to assist them in the investigation and defense of a covered claim.

Commercial Auto Insurance

Provides coverage for claims for which your business becomes legally liable arising out of your business' use of autos.  It may include protection for the damage to an auto that is titled to your business.

Computer Coverage

Reimburses you for any physical loss or damage to your computer hardware, software, or data and includes coverage for the cost to reconstruct software or data.  This coverage can also include business interruption following such a loss if business interruption is covered elsewhere in the policy.

Concealment

Withholding material facts from an insurance company when negotiating an insurance contract or making a claim with the intention of deceiving the insurance company; may be grounds for voiding the policy.

Consequential Loss to Stock Coverage

Reimburses you for financial loss in situations where damage to one part of your inventory also reduces the value of related, but undamaged, components.

Contractor's Equipment and Tools Coverage

Insures equipment and tools used at the job site, being transported between jobs, and being transported from your primary location to the job site. Insures the cost to rent equipment and tools following a covered loss to your own equipment and tools.

Contract

A legal agreement between two or more parties.

Contractual Liability

Provides coverage for certain liabilities you assume in writing in a contract, subject to the policy terms and conditions.

Counterfeit Money Order and Paper Currency Coverage

Reimburses you for financial loss if a customer pays with a counterfeit money order or counterfeit paper currency.

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Declarations

The portion of the insurance policy that contains specific information, such as the name and address of the insured, description of the property, coverage, premium and policy term.

Deductible

The total dollar amount you must pay before your insurance policy begins to pay your covered loss.

Depreciation

A decrease in value over a period of time as a result of use, wear and tear, or obsolescence.

Design Services Liability Coverage

Protection for contractors against damages that arise out of errors in design by the insured contractor in conjunction with projects the insured constructs.

Disability

A physical or mental impairment that substantially limits one or more major life activities.  It may be partial or total.

Discrimination

Unfair treatment or denial of rights to a person on the basis of the group, class, or category to which the person belongs.

Discovery Period

Under certain types of "claims made" policies, a discovery period is the time after the end of the policy period in which the insured has to report a loss that occurred during the policy period.  The usual discovery period is one year.

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Effective Date

The inception or starting date and time of an insurance policy.

Embezzlement

Fraudulent use or theft of another's property or money which has been entrusted to one's care.

Employee Benefits Liability Coverage

Protects your business from losses arising from the administration of employee benefit programs, such as enrolling employees in a health plan.

Employee Dishonesty Coverage

Reimburses you for financial loss to your business due to dishonest or fraudulent activities of one or more employees.

Employee Retirement Income Securities Act of 1974 (ERISA)

Prescribes federal standards for funding, participation, vesting, termination, disclosure, fiduciary responsibility, and tax treatment of private pension plans.

Employer's Liability Coverage

Provides you with liability protection in case you're sued for damages arising from employment-related accidents or diseases.  This coverage may also provide certain benefits if you're sued by a third party affected by a workplace injury, such as a family member of the injured worker.  This may be a section of a Workers' Compensation Policy providing coverage against the liability of an employer for injuries to employees, as distinct from the liability imposed by Workers' Compensation Law.  See Workers' Compensation Insurance.

Employment Practices Liability Coverage

Protects your business against claims resulting from wrongful termination or discipline, discrimination, sexual harassment, and failure to employ or promote.

Endorsement

A written amendment added to and made a part of an insurance policy for the purpose of changing the original insurance policy language.

Equipment Breakdown Coverage

Pays to repair or replace your equipment in case of breakdowns caused by losses that are typically excluded from most business insurance policies, such as power surges, mechanical malfunctions, and boiler explosions.  Covers computers, scanning equipment, phone systems, air conditioners, refrigeration systems, and many other types of equipment.  It may also be known as Systems Breakdown Coverage.

ERISA

See Employee Retirement Income Securities Act of 1974.

Errors and Omissions (E & O) Insurance

Protects you against liability for committing an error or omission in the performance of professional duties.  Generally, such policies are designed to cover financial losses rather than liability for bodily injury or property damage.

Expiration Date

The date specified in an insurance policy as its termination date.

Exposure

The state of being at risk of loss due to some hazard or contingency.  Also used to measure the rating units or the premium base of a risk.

Extra Expense Coverage

Covers additional costs of continuing your business following a loss or damage to your insured property (building and/or personal property).  For example, the expenses of an alternative office space after a covered loss for a specified period. This is important coverage if you can't close your business in the event of a covered loss, but must quickly find alternative office space to continue your business operations.

Fidelity Bond

Reimburses you for losses caused by dishonest or fraudulent acts of employees.

Fire Damage Coverage

Pays for fire damage to property of others in the building you occupy caused by your business. It also applies to other parts of the building you occupy that may be damaged due to negligence by you or an employee.

Food Storage Coverage

Reimbursement for the cost of food inventory damaged due to spoilage caused by an insured incident.

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Garagekeepers' Legal Liability

Provides coverage for damage to your customers' vehicles, for which you may become legally liable, when you provide parking.

Glass Coverage

Pays to replace or repair glass damaged by a variety of factors, including vandalism and malicious mischief.  Suitable even if you don't own your building, but your lease specifies that you are responsible for building glass.

Hazard

A condition which creates or increases the chances of a loss arising from a peril.   Examples include slippery floors or unguarded premises.

Hired and Non-Owned Auto Liability

Provides a company protection against liability claims arising from the use of vehicles hired, rented, or owned by others (including employee's own vehicles) on company business, but does not include vehicles titled to the company.

Hold Harmless Agreement

A hold harmless agreement is normally included in a written contract whereby one party to the contract agrees to assume the other party's liability arising from specified actions. For example, if you contract another party to do work for you, you agree, in writing, that the other party will pay for any liability you incur because of his work.

Installation Coverage

Covers building materials that will become a permanent part of the structure and the cost of labor involved in completing the installation. Also applies to materials while at the job site, while stored in temporary locations, or while in transit between your primary business location and the job sites.

Insurable Interest

Any actual, lawful and substantial economic interest in the safety or preservation of the subject of the insurance from loss or destruction or financial damage or impairment.

Insured

The person or organization protected by an insurance company, which is specifically named and defined in the policy.

Insured Contract

A definition in a liability policy which describes the types of contracts in which liability can be assumed by the insured and can be included for coverage in the policy.

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Kidnap and Ransom Coverage

Provides financial protection in the event you, or your employee(s), are kidnapped and a ransom is demanded.  Coverage may extend to reimbursement for extortion demands for threats to your property.

Liability

A company's legal responsibility to make financial restitution for any loss or damage that occurs to a third party due to an action taken by the company.  May also refer to a company's debts and future obligations.

Liability Insurance

Provides financial protection in case your business is sued or held legally responsible for bodily injury or property damage to a third party. Typically, covered expenses include the amount the insurer spends to investigate or defend the claim or suit; other costs incurred directly by the insurance company, such as attorney's fees, witness fees, and police report costs; court costs or other costs assessed against you; reasonable expenses you incur at the insurance company's request to aid in your defense against a claim, such as your loss of income for a day spent in court; any judgment or settlement arising from a covered suit; any required interest on the judgment if the defense is unsuccessful; and medical expenses for injured parties. The policy may include coverage for premises, personal injury, products and completed operations and contractual liabilities.

Liquor Liability

Provides your business with protection from bodily injury and property damage claims arising from selling or serving alcoholic beverages.

Loss

The basis for a claim, for which insurance pays.

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Materials On Site Coverage

Protects your business from financial loss due to theft, vandalism or other damage to materials being stored or used at a job site.

Medical Payments Coverage

Reimburses your business for medical and funeral expenses as a result of bodily injury or death for which your business is held liable.

Misrepresentation

Making written or verbal statements that are untrue or misleading with the intention of deceiving the insurance company and which may be grounds for voiding an insurance policy upon which the original statements were based.

Money and Securities Coverage

Protects your money and securities while they're on your business premises or off premises, such as while being transported to the bank.

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Named Insured

Non-Owned and Hired Automobile Liability

Provides your business protection against liability claims arising from the use of autos hired, rented or owned by others (including your employees) on your company's business, but does not include autos titled to your company.

Occurrence

An accidental event that results in loss or damage.

Off-Premises and In-Transit Coverage

Extends protection of your business personal property away from your principal business site.

Off-Premises Power Failure Coverage

Reimburses you for loss of business income if an off-premises power failure temporarily shuts down your business operations.

Other Business Structures

Extends protection to other business structures on your property, such as a greenhouse, business car garage, or storage shed.

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Peak Season Coverage

When you insure your inventory for its average monthly value, this automatically provides you with a specified percentage increase in insurance coverage during peak inventory periods.

Peril

The cause of a possible loss, such as fire, windstorm, theft, explosion, or riot.

Personal Injury Coverage

Protects your business from liability due to injury, other than bodily injury, to a third party that arises out of false arrest, detention or false imprisonment, malicious prosecution, wrongful eviction, wrongful entry, invasion of privacy, slander, other than in course of advertising, publishing, broadcasting or telecasting (See Advertising Liability).

Personal Property Coverage

See Business Personal Property Coverage

Policy

The printed legal document stating the terms and conditions of the insurance contract that is issued to the policy holder (insured) by the insurance company.

Pollution Liability

A specialized insurance policy that covers liability associated with the contamination of the environment--air, ground, and water. It may also provide coverage for clean-up costs.

Premium

The dollar amount you pay for business insurance, or the cost of the insurance.

Premises

The property described and designated in an insurance policy's declarations.

Premises Liability Coverage

Protects your business against liability damages due to an injury that occurs to a third party on your premises.  An example would be a customer slipping or falling at your location.

Products and Completed Operations Coverage

Pays for resulting damages and legal expenses if injury results from a product your company made or a service your business provided.  In the event of a lawsuit, your business is also covered for related defense costs regardless of who's at fault.

Professional Liability

See Errors and Omissions Liability

Property Damage Liability Coverage

Protects your business against liability damages arising from physical loss or damage to someone else's property (other than your employees'), usually including the damages for their loss of use of the property.

Property Insurance

Provides financial protection against physical loss or damage to many kinds of property that you own that are related to your business, including your building and your equipment, tools, supplies, furniture, fixtures, and improvements and betterments if caused by fire, windstorm, vandalism or any other covered incident.

Property of Others Coverage

Covers you for damage to property of others which is in your possession and for which you are legally liable while it is in your possession.

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Reasonable Use of Force Coverage

Covers against liability for an intentional act that results from a use of reasonable force to protect yourself or your property from harm.  For example, keeping someone from vandalizing your business or boarding up windows to protect your business from an approaching storm, even though it may damage the building you lease.

Reimbursement

The payment of the expenses actually incurred as a result of an accident or sickness, not exceeding any amount specified as a limit in the policy.

Replacement Cost Value

The dollar amount it would cost to replace or repair damaged property without any deduction for depreciation.

Robbery

The felonious taking of the personal property of another, either by force or by threat of force.

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Seasonal Inventory Increase Coverage  

Self-Insurance

Alternative to purchasing insurance where a company or individual assumes the risk of paying for its losses and sets aside the necessary funds to pay for such losses.

Sewer and Drain Back-Up Protection

Protects you against losses caused by water backing up through sewers or drains, or by water overflowing from a pump.

Sexual Harassment

Unwelcome sexual advances, requests for sexual favors, or other verbal or physical conduct of a sexual nature that are made a condition of employment, used as a basis for employment decisions, or create a work environment that interferes with job performance.

Sign Coverage

Insures your outdoor signs against theft, fire, vandalism and other losses.

Subrogation

Surety Bond

A document guaranteeing to the principal that a designated amount of money will be paid by the surety if described actions do not occur.

Systems Breakdown Coverage

See Equipment Breakdown Coverage.

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Temperature Change Coverage

This coverage protects any perishable stock you have on your premises in case of damage caused by a temperature change due to an equipment breakdown or power failure.

Theft

Any act of stealing, including burglary, robbery and larceny.

Tort

A wrongful act, resulting in injury or damage, on which a civil lawsuit may be based.

Transit Insurance

Protects any shipment of goods you make by car, truck, rail, or air from the time it leaves your business location to the time it's delivered to your customer.

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Umbrella Coverage

Excess liability insurance that provides additional protection for your business over and above the liability coverage provided in your business owners, automobile and workers' compensation policies.

Underwriter

The person, or insurance company, who evaluates applications for insurance coverage, decides whether to accept or reject the risk, and sets a price for the coverage.

Underwriting

The process of evaluating applications for insurance coverage, deciding whether to accept or reject the risk, and setting a price for the coverage.

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Valuable Papers Coverage

Pays for the cost to research, reproduce, replace or restore your valuable business records if they are not duplicated and they are damaged or destroyed by a covered loss. Coverage includes printed or written documents, books, films and more.

Vandalism

The malicious or ignorant, often random, destruction or spoilage of another person's property.

Warranty

A warranty product protects customers from financial loss associated with the breakdown and/or underperformance of a product or service.

Water Damage Coverage

Protects you from losses resulting from flood, surface water, and the backup of sewers, drains or sump pumps.

Workers' Compensation Insurance

Provides benefits, as specified by state law, to employees for injuries received on the job, or for diseases caused or aggravated by exposure to conditions on the job, regardless of who's at fault for the injury or illness.  Typical expenses covered are medical benefits, including medical, hospital, surgical and other related healthcare costs such as physical therapy and prosthetic devices; disability income benefits, including services such as vocational rehabilitation that help an injured worker return to productive work; and death benefits.  Also see Employer's Liability Coverage.