Resource

Insurance Glossary

Plain-English definitions for commercial insurance terms used across our articles. 143 terms, written for US small business owners — no jargon, no carrier marketing copy.

A

ACORD 25 form

The standard certificate of insurance form used to document proof of business liability coverage for vendors and clients.

ACORD certificate

A standardized form (created by the Association for Cooperative Operations Research and Development) used to document proof of insurance coverage.

ACORD form

The standardized template used for certificates of insurance. Lists policy types, numbers, effective dates, limits, and special provisions like additional insured or waiver of subrogation.

additional insured

A person or organization added to an insurance policy to receive coverage protection alongside the primary policyholder.

additional insured endorsement

An amendment to your GL policy that extends coverage to a third party (typically the general contractor or property owner) for liability arising from your work. Most online carriers add this

admitted insurance company

An insurance carrier licensed and regulated by a state's insurance department to write policies within that state.

Aggregate limit

The maximum total amount an insurer will pay across all claims during a policy year. Standard for general liability is $2 million.

AM Best rating

A financial strength rating assigned by AM Best, the insurance industry's credit rating agency, indicating an insurer's ability to pay claims. Look for A- (Excellent) or better.

AM Best Rating

A financial strength rating for insurance carriers. A- (Excellent) or better means the carrier can reliably pay claims.

B

Binding

The moment insurance coverage officially starts. With online carriers, binding is instant after payment. With traditional brokers, binding can take 1–7 business days.

blanket additional insured coverage

Automatic additional insured status when required in a contract, without naming each client on the endorsement. Faster than individual endorsements but not all insurers offer it.

BOP (Business Owner's Policy)

A bundle of general liability and commercial property insurance sold as one package, typically at a 15–25% discount compared to buying separately.

breach notification

Legal requirement to inform affected individuals, regulators, and sometimes media when personal information is compromised in a security incident.

breach notification law

State or federal statute requiring businesses to notify affected individuals and regulators when personal data is compromised, typically within 30–90 days of discovery.

breach of fiduciary duty

A claim alleging that a director or officer failed to act in the best interests of the company or its shareholders, or violated the duty of care or loyalty owed to the organization.

business email compromise (BEC)

A fraud attack where an attacker impersonates a company executive or trusted vendor via email to trick employees into transferring funds or disclosing sensitive data.

business interruption

Insurance coverage for lost revenue when systems are down due to a covered incident like a data breach.

Business interruption coverage

Also called business income coverage; insurance that replaces lost revenue if a covered event forces your business to close temporarily. Usually included in a BOP but requires a separate rider if

Business Owner's Policy (BOP)

A bundled policy combining property, liability, and business interruption coverage — typically 10-15% cheaper than buying each separately.

C

cap table

A capitalization table documenting all equity ownership in a company, including shares held by founders, investors, and option holders.

captive agent

An insurance sales person who represents a single insurance company or group of related companies and is obligated to place business with that carrier first.

CCPA

California Consumer Privacy Act; state law requiring businesses to notify California residents of data breaches and granting consumers statutory damages of $100–$750 per incident.

Certificate Holder

The box on the COI showing your client's name and address. Identifies who the certificate is being issued for and who can make claims under additional insured status.

certificate of insurance (COI)

A document proving that a business has active liability insurance, often required by clients, venues, or contractors before work begins.

Certificate of Insurance (COI)

A document proving you carry active coverage. Enterprise clients and landlords commonly require a current COI before signing contracts.

CG 20 10

An ISO standard endorsement form that adds owners, lessees, or contractors as additional insureds on a commercial general liability policy.

CG 20 10 04 13

The standard ISO endorsement form for additional insured status. Lists the client by name on your policy, making them a named additional insured.

CG 24 04 05 09

The ISO endorsement form titled 'Waiver of Transfer of Rights of Recovery Against Others to Us.' Adds waiver of subrogation protection to your policy.

Claims History

Your record of past claims or lawsuits. Even one claim can increase premiums 25-50% for 3-5 years.

claims made policy

An insurance policy that covers only claims reported to the insurer while the policy is active, not incidents that occurred before the policy started.

claims-made

An insurance policy structure requiring active coverage both when the error occurs and when the claim is filed; lapsed coverage means no protection for claims filed after cancellation.

claims-made basis

An insurance structure where coverage applies only if the claim is made and reported while the policy is active, not based on when the underlying incident occurred.

class code

A numerical risk classification assigned to your type of contracting work by insurers. Reflects historical claims frequency and severity for that trade and directly affects your premium.

Classification Code

An NCCI or state-assigned code reflecting the risk level of work employees perform. Determines the base rate per $100 of payroll.

commercial auto insurance

Coverage for vehicles used for business purposes. Required if you drive to job sites, haul materials, or tow equipment; personal auto policies deny claims for work-related accidents.

Commercial Auto Insurance

Covers vehicles used for business purposes — delivery vans, work trucks, fleet vehicles. Personal auto policies exclude business use.

Commercial Auto Insurance

Covers liability, collision, and damage for vehicles used in business operations. Personal auto policies exclude business use.

Commercial General Liability (CGL)

Insurance protecting a business from financial loss if liable for third-party bodily injury, property damage, or personal and advertising injury claims.

Commercial Package Policy (CPP)

A customizable insurance package combining multiple coverage types like liability, property, and workers' compensation into one policy.

Commercial property

Insurance covering your physical business assets—building, equipment, inventory, furniture, and signage—against damage from fire, theft, vandalism, or weather.

commercial umbrella policy

An insurance policy that sits above your base general liability coverage and provides additional liability protection in $1 million increments, kicking in after your underlying policy limit is

completed operations coverage

GL protection that covers liability claims arising from work after you've finished the job and left the site. Protects you if a structure fails months later due to your workmanship.

coverage limits

The maximum amount an insurance policy will pay for a covered claim, such as $1 million per occurrence.

Cyber liability

Insurance covering data breach costs, ransomware payments, notification expenses, and regulatory fines resulting from digital attacks or data loss incidents.

Cyber Liability insurance

Insurance covering data breach costs, business interruption from cyberattacks, forensic investigation, ransomware response, and third-party liability claims.

D

data breach

Unauthorized access to or disclosure of personal information, triggering state and federal notification requirements.

Data breach notification

The legally required process of informing affected individuals and regulators when personal data is compromised. All 50 US states have breach notification laws.

Deductible

The amount you pay out-of-pocket before your insurance kicks in. BOP deductibles typically range from $500 to $1,000; you can set them independently for each coverage type in separate policies.

defense costs

Legal fees and expenses to defend against a claim; may erode the policy limit or be paid separately depending on policy terms.

Digital Millennium Copyright Act (DMCA)

Federal law providing safe harbors from copyright infringement liability for online service providers who adopt policies terminating repeat infringers' accounts.

Directors & Officers (D&O) Insurance

Protects company leadership from personal liability in lawsuits alleging mismanagement, fiduciary breaches, or regulatory violations.

Directors & Officers (D&O) liability

Insurance protecting company leaders against personal liability for decisions made on behalf of the business.

directors and officers (D&O) liability insurance

Coverage protecting directors or officers from personal liability arising from decisions made in their professional roles, including legal defense costs and settlements or judgments.

Directors and Officers Liability insurance (D&O)

Liability insurance covering directors and officers against claims for alleged wrongful acts in their management capacity, including breach of fiduciary duty and misrepresentation.

E

employer identification number (EIN)

A unique nine-digit number issued by the IRS required to pay federal taxes, hire employees, open business bank accounts, and apply for licenses.

Employment practices liability (EPLI)

Insurance covering claims from employees alleging wrongful termination, discrimination, harassment, or other employment-related misconduct.

Employment Practices Liability (EPLI)

Covers claims by employees alleging discrimination, wrongful termination, harassment, or other employment-related violations.

encryption

Technical safeguard converting data into coded form so only authorized users with a decryption key can read it, protecting information at rest and in transit.

Endorsement

An add-on rider that extends your base insurance policy to include additional coverage or modify existing terms at a lower cost than buying a standalone policy.

endpoint detection and response

Security tool that monitors devices for suspicious activity and enables rapid response to threats.

equipment floater

An insurance endorsement that covers portable business equipment (tools, machinery) against loss or damage while in use or in transit.

errors and omissions (E&O) insurance

Professional liability coverage that protects against claims of professional mistakes, negligence, or failure to deliver promised services.

excess liability insurance

Insurance coverage that provides additional protection above your base liability policy limits, similar to umbrella coverage.

Exclusion

A specific risk or situation not covered by an insurance policy. Standard GL excludes professional errors, damage to your own property, and employment-related claims.

Experience Modification Rate (EMR)

A multiplier adjusting workers' comp premium based on claims history vs. industry average. Below 1.0 earns a discount.

F

Federal Unemployment Tax Act (FUTA)

A federal payroll tax employers must remit if they paid $1,500+ in wages in any quarter or had one or more employees for at least 20 weeks; funds state unemployment insurance systems.

first-party costs

Direct expenses your business incurs from a cyber incident, including forensic investigation, notification, credit monitoring, ransomware payments, and lost revenue.

first-party coverage

Cyber insurance that pays for losses your business suffers directly, including incident response, data recovery, business interruption, and ransom payments.

forensic investigation

Technical analysis to determine what data was accessed, how the breach occurred, and the scope of compromise.

Form I-9

The employment eligibility verification form all U.S. employers must complete for every hired individual; mandatory but not insurance.

fraudulent insurance act

A crime committed by knowingly presenting false written statements, certificates, or evidence of insurance with intent to defraud. Carries criminal penalties and contract breach consequences.

funds transfer fraud (FTF)

Unauthorized movement of money from a business account, often resulting from business email compromise or compromised banking credentials.

G

GDPR

General Data Protection Regulation; European Union law governing the collection, processing, and protection of personal data, with fines up to €20 million or 4% of global revenue.

general aggregate

The maximum total amount an insurer will pay for all claims combined during a single policy period, typically one year.

general liability insurance

Coverage for third-party bodily injury or property damage claims arising from your work—e.g., a client trip-and-fall or damage you cause to someone else's property. Does not cover your own injuries,

General Liability Insurance

Covers third-party bodily injury, property damage, and advertising injury claims against your business. Required by most commercial leases.

H

HIPAA

Health Insurance Portability and Accountability Act; federal regulation protecting the privacy and security of health information.

I

immutable backup

Data copy that cannot be altered or deleted, protecting against ransomware attacks that target standard backups.

incident response

The process of investigating, containing, and documenting a cybersecurity breach, typically performed by specialized forensics firms.

incident response plan

Documented procedures outlining roles, responsibilities, and steps to take when a security breach occurs.

indemnify

The company's legal obligation to reimburse or protect a director or officer for losses, liabilities, or defense costs incurred in their official capacity.

independent broker

An insurance sales person licensed to represent multiple insurance carriers and authorized to place coverage with any admitted insurer in the client's interest.

Inland Marine (Tools and Equipment) Coverage

Protects portable tools and equipment against theft, damage, or loss at job sites — not covered by standard property policies.

inland marine coverage

Coverage for your owned tools and equipment against theft, damage, or loss at a job site. Also called tools coverage; protects your property, not third-party property like GL does.

inland marine insurance

Coverage for portable business equipment like cameras, laptops, and tools in transit and at third-party job sites.

L

limit of liability

The maximum amount an insurer will pay for a covered loss under your policy.

limited liability company (LLC)

A business structure that shields personal assets from most business debts and lawsuits, though it does not eliminate the need for liability insurance.

M

manuscript coverage

Custom-written insurance policy language tailored to a specific business's unique risks, rather than a standard form that applies to many businesses.

material misrepresentation

Failure to disclose known facts on an insurance application, which can void coverage if discovered after a claim.

misclassification

Being assigned an incorrect class code by your insurer—e.g., coded as general labor when you are actually a finish carpenter. Results in wrong premium and is worth challenging with your carrier.

misrepresentation to investors

A claim alleging that company leadership made false or misleading statements to investors about the company's financial condition, business, or prospects.

Monopolistic State Fund

A state-run workers' comp program that is the only coverage option. OH, ND, WA, and WY operate monopolistic funds.

multi-factor authentication

Security control requiring two or more verification methods to access accounts, reducing unauthorized access risk.

multifactor authentication (MFA)

Security control requiring two or more verification methods to confirm a user's identity before granting access to business accounts or systems.

N

NAICS Code

North American Industry Classification System code — a six-digit number classifying your business by industry. Insurers use it to determine your risk category and premium.

National Council on Compensation Insurance (NCCI)

The organization that develops classification codes, collects claims data, and publishes advisory rates used by most states.

non-renew

An insurer's decision to terminate coverage at the end of your policy period and not offer renewal. Common after multiple claims in a short timeframe.

notice of cancellation clause

A policy provision requiring the insurer to notify the certificate holder a specified number of days (typically 30) before canceling or materially changing your coverage.

O

occurrence policy

An insurance policy that covers claims arising from incidents that occurred during the policy period, even if the claim is filed after the policy expires.

occurrence-based

An insurance policy structure covering incidents that happen during the policy period, regardless of when the claim is filed.

on-demand general liability insurance

Flexible insurance sold by the hour, day, week, or month rather than as an annual policy, allowing coverage only on days work is performed.

On-Demand Insurance

A policy model allowing you to activate and deactivate coverage by the hour, day, or month rather than committing to a full annual policy.

P

PCI DSS

Payment Card Industry Data Security Standard; a set of security requirements for businesses that process, store, or transmit payment card data.

Per occurrence limit

The maximum amount an insurer will pay for a single claim event. Standard for general liability is $1 million.

policy inception

The date and time when an insurance policy becomes active and coverage begins.

policy limits

The maximum amount an insurer will pay per claim and in total over the policy term, such as $1M per claim / $2M aggregate.

policy period

The dates during which an insurance policy is active; coverage applies only to incidents occurring within this window.

primary and non-contributory basis

A requirement that your insurance pays claims first and does not share costs with the client's own insurance. Ensures your policy responds before the client's coverage.

prior knowledge exclusion

A D&O policy provision that excludes coverage for claims the insured knew about before the policy started, preventing coverage of anticipated disputes.

Professional Liability (E&O)

Covers claims that your professional services caused a client financial harm through errors, omissions, or negligent advice.

R

ransomware

Malicious software that encrypts a business's files or systems, with attackers demanding payment in exchange for decryption keys.

retention

The amount a policyholder pays out of pocket before insurance coverage begins, typically $2,500–$10,000 for E&O and cyber policies.

retroactive date

The policy start date before which incidents are not covered; breaches that began before this date are excluded from coverage.

Return-to-Work Program

A structured plan to bring injured employees back to modified duty quickly, reducing claim severity and lowering EMR over time.

S

Safeguards Rule

Federal Trade Commission requirement for financial institutions to develop and maintain an information security program protecting customer data.

securities class action

A lawsuit brought by multiple shareholders alleging misrepresentation, fraud, or other violations of securities law by company leadership or the company itself.

self-insurance

Authorization for employers to cover workers' compensation claims directly rather than purchasing insurance from a carrier or state fund.

Series A funding

The first significant round of venture capital financing, typically raising $2M-$15M in exchange for equity. Investors usually require governance protections including D&O insurance.

Side A coverage

The portion of a D&O policy that protects individual directors and officers directly when the company cannot or will not indemnify them, covering defense costs and judgments.

Side B coverage

The portion of a D&O policy that reimburses the company when it indemnifies directors and officers for covered claims, protecting the company's balance sheet.

Side C coverage

Entity coverage within a D&O policy that protects the company itself against securities claims, particularly when the company is named as a defendant alongside individuals.

sole proprietor

An unincorporated business owned by one person with no legal separation between personal and business assets, creating unlimited personal liability.

State Compensation Insurance Fund

A state-run alternative to private insurance carriers for purchasing workers' compensation coverage; available in most states alongside licensed private carriers.

state disability insurance

Mandatory coverage in certain states covering non-work injuries or illnesses; separate from workers' compensation and varies by state structure.

statutory damages

Fixed monetary penalties set by law for violations, such as up to $750 per consumer per data breach incident under California law, independent of actual harm.

sublimit

A lower maximum payout amount for a specific coverage type within a policy, such as a cap on ransomware payment reimbursement.

subrogation

The right of an insurer to sue a liable third party to recover money paid on a claim. Insurance companies use subrogation to recoup losses from parties responsible for the damage.

surplus lines

Insurance coverage placed with non-admitted carriers (not licensed in a state) for high-risk or unusual exposures that standard carriers won't write.

T

tail / extended reporting coverage

An endorsement to claims-made policies that extends coverage for claims filed after policy cancellation, protecting work completed while the policy was active.

term sheet

A non-binding document outlining the key terms and conditions of a venture capital investment, including insurance requirements and coverage minimums.

third-party coverage

Cyber insurance that covers claims made against your business by others, such as customer notification costs, regulatory fines, and lawsuits from affected parties.

third-party injury

Bodily harm to someone other than the business owner or employees, such as a client or bystander injured due to the business's work.

third-party liability

Insurance coverage for claims and lawsuits filed against the policyholder by customers, employees, or business partners.

U

Umbrella Insurance

Adds liability coverage above GL, auto, and employer's liability limits. Typically $1M increments starting at $300–$600/year.

umbrella liability policy

An additional liability policy that stacks $1M–$5M in coverage above your GL limits. Typically costs $200–$500/year per $1M of additional coverage and is the cheapest way to meet high-limit

umbrella policy

Additional liability coverage that sits above your base policies, providing extra limits when your primary coverage is exhausted. Used to meet high enterprise contract requirements.

underlying policy

Your base general liability or commercial auto insurance policy that must be in place before an umbrella policy can be added.

underwriting

The insurer's process of evaluating risk, reviewing security controls, and determining eligibility and premium for coverage.

W

waiver of subrogation

An endorsement preventing your insurer from suing your client to recover claim payments, even if the client was partly at fault. Protects the client from your insurer's recovery efforts.

Workers' compensation

State-mandated insurance covering medical bills and lost wages for employees injured in work-related incidents. Required in nearly every state once you hire employees; never included in a BOP.

workers' compensation insurance

Coverage for employee medical bills and lost wages for work-related injuries. Required by law in most states once you hire your first employee, even part-time.

Workers' Compensation Insurance

Covers employee medical costs and lost wages from work injuries. 47 states require it once you hire your first employee.

Term missing or unclear? These definitions are pulled from the articles where they're used in context — when an article needs a new term, the definition is added there and surfaces here automatically. Browse articles for the term in context, or open the Coverage Navigator to see which coverage categories typically apply to a business like yours.