Explaining commonly used terms in the world of commercial insurance

Key takeaways:

  • Insurance jargon can be confusing
  • We explain 17 commonly used insurance terms for business owners
  • Avante Insurance will work with you to help you get the business coverage you need

Trying to understand the language in your insurance policies might leave you scratching your head, wondering why they don’t just state things in plain language. 

Making important business insurance decisions requires that you understand the jargon and what it means for your policies and claims. So, before you pull out your hair, take a look at translations of 17 of the most common insurance terms below. 

1. Additional insured – This is a person or business you add to your policy who is not responsible for paying the premium but is covered with some limitations. Additional insureds are only covered under your policy if the work they do is related to your business. As an example, let’s say you own a barbershop. A stylist rents a chair from you and asks to be added as an additional insured. If someone is injured by a new chemical they use and the person sues, they, as an additional insured, would be covered because they are working on your business premises. 

2. Aggregate limits – The aggregate limit is the maximum amount of money your insurer is contracted to pay to you during a specific policy period. Let’s say you file a claim on your commercial property policy because a hurricane caused flooding. You have insured your property for $100,000. This means that is the total the insurance company will pay for all claims on that policy in the year the flooding occurred. 

3. Blanket insurance – This type of policy is useful for businesses that have more than one location, a “campus” made up of multiple buildings, or a type of business that requires outbuildings because it allows the property owner to insure multiple property types at one location or one property type in multiple locations under one policy. 

4. Builder’s risk insurance – If you’re a home or commercial property builder, builder’s risk insurance protects all building materials that a builder uses during a construction project, whether they are on-site, off-site, or being transported.

5. Business interruption insurance – This policy works hand-in-hand with your other business policies by providing reimbursement for operating expenses if you have to shut down due to a covered loss.

6. Commercial (business) insurance – You’ll need an insurance package tailored to your company and your friendly insurance agent can help you with that. Here’s a list of common business policies and what they cover:

General liability – This policy helps pay for expenses from property damage or if someone is injured on your property. 

Professional liability – If someone accuses you of making a mistake that caused them to lose money, this policy has you covered.

Commercial auto – Using a car for business requires a separate commercial auto policy that covers things that a personal auto policy doesn’t.

Workers’ compensation – If an employee is injured at your workplace, this helps pay for their medical bills and lost wages.

7. Commercial property insurance – If you can’t use your property because of a natural disaster or other damage (like broken water pipes), this policy will cover the building and other business property that you own or lease.

8. Commercial flood insurance – This insurance is actually provided by the National Flood Insurance Program but is available through your agent. It covers your business in the event of flood damage that’s due to high water, excessive rain runoff, or hurricanes. 

9. Data breach insurance This coverage will help mitigate the fallout of a data breach as well as lend assistance to prevent a breach from happening in the first place.

10. Deductible – The deductible is the amount you have to pay before your insurance policy starts paying after you file a claim. Depending on the policy, it can be a flat amount or a percentage of the loss. As an example, if you have a $1,000 deductible and suffer a loss that amounts to $10,000, you will pay the first $1,000 and your insurance would pay the rest, up to the dollar limit of your policy.

11. Directors and officers liability insurance – Often abbreviated as “D&O,” this policy helps protect your business’s financial assets if the directors or officers are accused of wrongdoing or negligence. The policy safeguards your money from legal settlements and will pay for legal representation. 

12. Employer’s liability insurance – With a worker’s compensation policy (required in most states), the right for an employee to sue you if they are injured on the job is limited. However, employer’s liability insurance will protect you if the employee files a lawsuit.

13. Employment practices liability insurance – If you or someone who works for you is accused of an employment-related claim, including harassment, this coverage protects you.

14. Marine insurance – Goods and company equipment in transport are covered under this policy. This includes damage to a transport vehicle and liability coverage for any third parties. 

15. Named perils insurance – This simply means that a particular policy only provides coverage for losses incurred by things that are named in your policy. Things like theft, fire, and natural disasters are events that may be part of a named perils insurance policy.

16. Umbrella insurance – This is extra liability coverage typically sold in increments of $1 million. It’s usually available at a relatively low cost and can significantly increase your company’s ability to cover the costs of judgments and claims in a lawsuit. 

17. Underwriting – Underwriting happens with most insurance applications. Underwriters assess risks and set policy premiums. 

Avante Insurance:  We have the insurance coverage you need (and that requires no translation)

At Avante Insurance, we ensure our clients receive the insurance products they need most cost-effectively. We do that by maintaining strong relationships with the leading insurance carriers.

In our four decades in business, we’ve helped many businesses meet their goals and fulfill their dreams by making insurance work for them.

Our team of experts will work with you to get the best types of coverage for your business. Reach out and book a no-obligation conversation with our team. Contact us today.

This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.