Business Insurance Glossary
Below are definitions of terms commonly used to describe different aspects of business insurance coverage:
Actual Cash Value (ACV) – Coverage for the dollar amount needed to repair or replace damaged property minus depreciation.
Blanket Insurance – Coverage for more than one type of property at a single location or similar types of properties at multiple locations.
Business Income (also called “Business Interruption”) Insurance – Coverage for lost net income and continuing expenses for a specified period of time, as a result of a cessation in normal business activities due to a covered loss.
Business Owner's Policy (BOP) – A package policy that combines property, general liability, business income and other types of coverages into a single policy.
Coinsurance (for property insurance) – A clause in the property policy requiring the policyholder to carry an amount of insurance equal to a specified percentage of the value of the property. Compliance will result in full payment on a covered loss minus the deductible. Failure to comply will result in a penalty for underinsurance.
Deductible – A dollar amount, usually a predetermined figure (i.e., $1,000) or a percentage (i.e., 2% of the value of the property) for which the policyholder must pay before the insurance company will pay for a covered loss.
Endorsement – A provision attached to an insurance policy that amends the policy's original terms.
Exclusion – A provision in a policy that eliminates coverage for certain losses, people, locations or conditions.
Liability Insurance – Coverage for covered claims of bodily injury or property damage for which the policyholder is legally liable.
Medical Payments – The specified amount for which the insurance company agrees to reimburse the policyholder for the medical expenses for bodily injury of a third-party. Medical expenses usually are paid regardless of fault.
Named-Peril Policy – An insurance policy that only covers losses resulting from perils specifically named in the policy.
Peril – An event or condition that causes a loss (e.g., fire, windstorm, theft, etc.).
Professional Liability Insurance – Coverage for professionals as determined by their respective industry's expected standard of care for claims of negligence, errors or omissions causing damages to a client.
Replacement Cost – Coverage for the dollar amount needed to repair or replace damaged property without deducting for depreciation.
Special (or “Open”) Peril policy – An insurance policy that covers losses resulting from any peril not specifically excluded in the policy.
Umbrella – Coverage for losses above the limit of the underlying policy. Umbrella policies may also broaden coverage for losses not normally covered in the underlying policy.
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