Business Insurance Glossary
Accelerated Death Benefits
Should a policy holder become terminally ill, need extreme medical intervention or require nursing home care, these proceeds would be paid — while the policy holder is still living — to cover such costs. Payments made while a policy holder is alive are deducted from any remaining policy proceeds that a beneficiary would receive.
Actual cash value
A form of insurance or type of insurance benefit that pays damages equal to the replacement value of damaged property minus depreciation. Depreciation is determined by the age and condition of the insured property. (See also replacement cost)
(see also public adjuster and independent adjuster)
An individual employed by a property or casualty insurer to evaluate losses and settle claims.
A professional licensed by the state who represents insurance carriers and sells insurance.
The maximum rand amount of coverage an insurer is under contract to provide to any one insured person or entity.
This type of insurance covers a farm or ranching operation’s dwellings, structures and machinery. Depending on the type of company to be insured, a business owner may choose to purchase protection for crops or livestock, as well. (See also crop insurance and livestock insurance)
A survey used to determine a property’s insurable value or the amount of loss.
Property owned by a policy holder including but not limited to stocks, bonds and real estate.
There are basically six types of auto insurance coverage, some required by law and some not:
- bodily injury liability, for injuries the policy holder causes to someone else
- medical payments or personal injury protection for treatment of injuries of the driver and passengers incurred while driving or riding in the policy holder’s vehicle
- property damage liability, for damage the policy holder causes to someone else’s property
- collision, for damage to the policy holder’s vehicle from a collision
- comprehensive, for damage to the policy holder’s vehicle not involving a collision with another vehicle (including damage from fire, explosions, earthquakes, floods, riots and theft)
- uninsured motorist coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance
In addition to an annual salary, an employer may choose to offer employees paid time off, profit sharing and health care coverage as part of the company’s overall compensation package.
This type of coverage allows business owners to insure more than one type of property at one location or one type of property at multiple locations under one policy.
A temporary evidence of insurance coverage for an applicant before a policy is issued.
A licensed insurance professional who typically works on commission to find suitable insurance for clients.
Business auto insurance
This type of policy covers cars, trucks and vans used for commercial purposes.
Business health insurance
To offset employees’ medical care expenses, an employer may choose to include this type of coverage in a company’s benefits package.
Business identity theft insurance
If a company’s confidential customer data is lost or stolen, sensitive information may be at risk. This type of insurance provides legal liability coverage to businesses in the event of data theft. (See also identity theft)
Customized coverage that can be tailored to meet companies’ specific insurance needs. Available options may include business owners policy, business umbrella liability, workers’ compensation and professional liability protection.
Business interruption insurance
When a business must vacate the site where it operates due to covered damages resulting from a fire or other disaster, this type of protection provides reimbursement for projected profits and related expenses that continue to accrue (such as leased business equipment) while the company’s operations are suspended.
Business liability insurance
This type of protection covers the cost of damages for which a company is found liable (up to policy limits), legal fees and the medical bills of anyone injured by the policy holder’s business.
Business owners policy
This type of insurance combines property and liability coverages into one convenient, cost-effective policy.
Business property insurance
Covers a business’s physical structure and its contents.
Business umbrella liability insurance
Provides companies with an extra layer of liability protection in the event of a catastrophic loss, such as a lawsuit.
A statistical term used to describe a single incident or a series of closely related events that cause major insured property losses in excess of a specified amount.
Compensation (typically monetary) provided by an insurer to a policy holder or beneficiary upon resolution of a previously submitted claim.
This term is used in reference to both health insurance and property insurance; in each case, its meaning is unique.
Health insurance — Coinsurance is a percentage of each claim above the deductible paid by the policyholder. Usually, a health insurance policy will establish a ceiling on total policy holder payments above which the insurer will pay 100% of insured costs.
Property — Coinsurance is the amount of coverage that a policy holder is required to carry in order for an insurance company to cover 100% of a loss, usually stated as a percentage of the value of the insured property.
When a policy holder is involved in an accident with another car or a stationary object, this policy covers the cost of related damages. (See also comprehensive coverage, liability coverage and uninsured motorist coverage)
Covers a policy holder for costs resulting from damage to his or her car caused by fire, theft, flood, vandalism or other named event — instead of damage caused by a collision with another vehicle. (See also collision coverage, liability coverage and uninsured motorist coverage)
Coordination of services
In the event a policy holder has overlapping coverage (more than one plan), the insurance carriers will determine which company is responsible for payment of benefits, so duplicate payments do not occur.
Lenders use this number to assess a potential borrower’s ability to repay debt — and also determine whether or not to grant credit. Data considered when calculating this figure includes — but is not limited to — types of credit the business has established, length of credit history, debt-to-income ratio and credit use patterns.
Hail, windstorm, wildfire, drought and insect infestations can destroy a farming operation’s crops. This coverage protects business owners in the event of such devastating loss. (See also agricultural insurance and livestock insurance)
Data and media coverage
In the event of covered loss, this type of protection provides coverage for the policy holder’s media programs and applications, data records and proprietary programs, as well as the property of others which is in the insured’s care, custody or control.
Funds paid to a beneficiary when the insured under a life insurance policy dies.
Degree of risk
The level of loss a peril could potentially cause. This measurement may affect policy premiums; however, in some cases a business may reduce policy costs by taking steps to manage risk.
The amount that a policy holder must pay out-of-pocket before an insurance company pays a claim.
When reimbursing a policy holder for property loss, insurance companies determine how much the covered property has decreased in value over a certain period of time.
Directors and officers liability coverage
If allegations of wrongful acts are made against a business’s directors or officers, this insurance would protect the company from losses due to legal judgments and related defense expenses.
Money returned to policy holders from an insurance company’s earnings that reflects the difference between the premium charged and actual losses.
If a business pays an insurance premium in advance for a policy that is later cancelled midterm, the insurance company is only entitled to keep the amount of premium for the period for which coverage was provided.
The cash value deficit that results from the death or disability of a wage earner or destruction of property. Factors considered when calculating this amount include lost income, medical, funeral or legal expenses and the cost of restoring or replacing property.
Employer’s liability insurance
This coverage protects employers in the event an employee files a lawsuit following a work-related injury or illness.
Employment practices liability insurance
Protects employers from employment-related claims (such as wrongful termination or harassment) made by current, potential or former employees.
A written supplement attached to an insurance policy that modifies the policy’s terms and conditions. This form is sometimes referred to as a rider.
Incidents, losses or liabilities that are explicitly not covered by the terms of an insurance policy. Coverage for such situations may be available for purchase under a separate policy.
A statistical measure that represents losses incurred by a block of business or a particular type of risk for a particular carrier. This figure may affect premium costs.
Financial measure used by insurance companies to illustrate vulnerability to loss.
Extra protection purchased to cover specific situations not covered by an insurance policy.
Extra expense insurance
When a business’s operations are interrupted due to a covered loss, this coverage pays for supplies, equipment and other necessary operating costs.
A form of liability insurance purchased by businesses for protection against dishonest acts committed by employees, such as theft or fraud.
A trusted individual appointed by a policy holder to oversee funds or property.
This is a separate policy that covers movable items of value such as laptops, tradeshow displays and other portable business equipment.
Flood and earthquake insurance
An insurance policy that specifically covers property damaged in a flood or earthquake, as these types of natural disaster are not covered by a standard insurance policy. Rates vary according to the insured business’s exposure to risk.
Calculated deception committed either by a policy holder attempting to obtain payment for an invalid insurance claim, or by an insurance company employee or broker who misrepresents information for personal financial gain.
Optional coverage available in some states, this type of insurance is used when a policy holder owes a lender or leasing company more money on a loan than the actual cash value of the item (e.g., auto, equipment). In the event of an accident, GAP insurance would make up this difference.
The period of time before an insurance policy is cancelled due to an unpaid premium. During this period, a policy holder may make a payment and it will not be considered late.
Group health insurance
Medical coverage offered to employees or members of an organization where subscribers are reimbursed for covered health care services according to the plan’s benefits structure.
Group life insurance
Typically offered as an employee benefit or as an option through a membership organization, this type of life insurance enables all plan participants to be covered under one policy.
An event for which a policy holder submits an insurance claim.
Proceeds from an insurance policy paid to the policy holder’s beneficiary.
Incurred but not reported losses (“IBNR”)
Reserves for claims filed with an insurer or reinsurer long after the event that caused the injury or loss or for claims reported for which the full extent of the injury or loss is not yet known. Insurance companies regularly adjust reserves for such losses as new information becomes available.
Losses (paid or unpaid) that occur within a set period of time.
To provide monetary compensation to a policy holder for losses.
When a thief steals private information such as someone’s Social Security number, credit card or driver’s license, and uses this data to assume the victim’s identity for fraudulent personal financial gain. (See also business identity theft insurance)
A freelance service provider who is hired on a contract basis by insurance companies to investigate and settle insurance claims.
When a business is unable to pay debts as agreed.
An accidental, non-catastrophic event that has the potential to cause predictable, measurable loss.
Designed to lessen financial losses, this system reassigns the potential risks of many policy holders to a company that provides contractual protection in exchange for a premium.
A confidential numerical ranking that is assigned to a business based on its credit history.
The amount — approximately equal to a property’s assessed worth — for which an insurance policy is written.
The company that assumes financial responsibility for the risks of many policy holders in exchange for a premium. Claims are paid out after a loss according to terms specified in the policy.
Coverage where the distinction between job-related and non-occupational illnesses or injuries is eliminated and workers’ compensation and general health coverage are combined. Legal obstacles may exist because the two coverages are administered separately.
Key-person life insurance
If a major shareholder, partner or other employee essential to a company’s success were to die, this coverage would replace lost income so the company could continue to operate.
This type of auto insurance pays for injuries and/or property damage caused by a policy holder when he or she is determined to be at fault in an automobile accident. (See also collision coverage, comprehensive coverage and uninsured motorist coverage)
The maximum amount for which an insurance company agrees to provide financial compensation.
An individual who is certified by the state to offer guidance to consumers about insurance and is authorized to sell insurance products and services.
A type of surety bond that some business owners must carry as a condition of conducting business that states the policy holder will conduct business in accordance with the law.
The highest amount a health insurance company will pay out on covered losses throughout the course of a policy holder’s life.
The maximum rand amount an insurance company will pay out for a named loss.
This type of coverage pays a beneficiary under a life insurance policy a set amount in the event of the insured’s death.
If a farm or ranch operation incurs loss as a result of the death (or necessary destruction due to illness) of its animals, this policy would compensate the policyholder for covered losses. (See also agricultural insurance and crop insurance)
Loss of income
If a landlord’s property becomes uninhabitable as a result of a covered loss, this insurance would replace rental income that would have been generated by the property.
Loss of rents
When a leased property becomes uninhabitable as a result of a covered loss, this type of protection would cover the property’s lease payments so the business could continue operations.
Contractual care agreements between insurance companies and health care providers, under which certain doctors and hospitals agree to offer reduced-cost medical services to members.
Health care services offered at a reduced cost to employees. Often this coverage is included in a company’s overall compensation plan.
Medical payments coverage
Compensation provided to a policy holder (or a covered passenger) that pays for reasonable and necessary health care treatments related to injuries sustained in a covered auto accident — regardless of who is at fault.
To lessen the impact of a potential hazard.
An event specifically listed in an insurance policy for which losses will likely be covered.
Required in some states, this type of auto insurance pays for medical bills, lost wages, replacement services and funeral expenses — regardless of who is at fault in the accident. (See also Personal Injury Protection — PIP)
The highest amount that a policy holder must pay toward covered health care costs.
Several separate business insurance coverages bundled into one and sold as a single unit.
A risk identified in an insurance policy (such as fire, flood and vandalism) that may or may not be covered.
Coverage for consumers such as homeowners, auto, pet, life or property insurance.
Non-real estate items that belong to a policy holder, such as vehicles, clothing, electronics, household goods and furniture.
A contractual agreement prepared by an insurance company that outlines the terms of insurance coverage for the purchaser.
The individual or organization that owns and controls an insurance contract.
The financial benefits for which a named beneficiary may be eligible under an insurance policy.
An ailment for which an individual was treated prior to the effective date of coverage for a health care policy.
The cost of insurance coverage for a specific risk provided by an insurer for a set length of time.
Commonly available for life insurance, this is a provision that allows continuation of coverage, even if premiums have not been paid, if certain conditions are met.
Professional liability insurance
(errors and omissions)
This type of coverage protects businesses against potentially catastrophic lawsuits involving professional negligence, or charges of failing to perform professional duties.
A company that supplies insurance.
An insurance company that contractually assumes part of the risk and part of the premium originally taken by the insurer.
If a business has replacement cost coverage built into its policy, the policy holder will be reimbursed for the actual cost of repurchasing the item when a claim is filed. Depreciation would not be factored into this amount. (See also actual cash value)
An insurance company’s best estimate of the amount it will pay out for claims.
The amount of risk retained by an insurance company that is not reinsured.
An attachment to an insurance policy that alters the policy’s coverage or terms. This may also be referred to as an endorsement.
A peril that could potentially cause loss to a policy holder.
A process designed to systematically manage an organization’s accidental losses.
Damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage rights over property on which they have paid claims, such as badly damaged cars. Salvage charges are the costs associated with recovering such property.
A listing of specific items covered under an insurance policy.
Employers who assume all or part of the responsibility for paying employees’ health insurance claims. Firms that self-insure for health claims are exempt from state insurance laws mandating the illnesses that group health insurers must cover.
Insurance policy proceeds paid by the insurer to a beneficiary or policy holder in order to resolve a claim.
A criterion used by insurance companies when calculating premium rates that indicates degree of loss or potential loss.
A company’s or individual’s ability to repay debt.
A policy holder who does not carry enough insurance may not be fully reimbursed for the types of losses covered under their policy.
The process of reviewing, accepting or rejecting insurance risks in order to charge appropriate premiums to potential or existing policy holders.
A peril that is not likely to be covered by an insurance company.
Uninsured motorist coverage
Coverage that provides coverage to a policy holder in the event he or she is injured as a result of an accident with a hit-and-run driver or other motorist with insufficient liability insurance. (See also collision coverage, comprehensive coverage, liability coverage and uninsured motorist coverage)
This term is used in reference to a policy which is not legally in force.