Most industries are rife with buzzwords, lingo and specific terminology that only those in the know use with regularity. Insurance is certainly no different. Practitioners and insurance agents may throw around words that make sense to them, but most small business owners will be left scratching their heads and wondering what in the world those terms mean. To help make life easier, we’ve put together a list of words and phrases that will help you make sense of your insurance policies and claims.
•Actual cash value (ACV): The cost of replacing property, determined by subtracting depreciation from the replacement cost.
•Additional insured: A person or organization added to a policy who is not the policy holder but who is protected under the policy terms.
•Adjuster: An insurance employee who investigates claims and recommends settlement options.
•Aggregate limit: The maximum amount an insurer will pay for all claims during a policy period.
•Arbitration: The process where a policy holder and insurance provider enters into a negotiation to resolve a dispute.
•Binder: A temporary agreement that provides insurance coverage until a formal policy is issued.
•Business interruption insurance: Coverage for lost income and expenses resulting from an incident that interrupts business operations.
•Claim: A request made to an insurance company for payment that falls under the policy terms.
•Claims-made policy: A policy that provides coverage only if the claim is made during the policy period.
•Coinsurance: A provision where the insured and the insurer share the covered losses in a specified ratio.
•Data breach insurance (also known as cyber liability insurance): A policy that covers your business in the event that a cyberattack would cause financial loss to your business or customers.
•Deductible: The amount the insured must pay out of pocket before the insurance company pays a claim.
•Endorsement: A document added to an insurance policy that modifies the terms, coverage, or conditions after the initial issuance.
•Exclusion: Specific conditions or circumstances that are excluded from policy coverage and noted within the terms of the policy.
•General liability insurance: Coverage for bodily injury, property damage, as well as personal and advertising injury to third parties.
•Indemnity: Providing financial compensation to restore the insured to the same financial position they maintained before a loss.
•Liability limit: The maximum amount an insurance policy will pay for a covered liability claim.
•Loss: The financial damage resulting from an event that is provided to the policy holder.
•Named perils: Specific risks or causes of loss explicitly covered by the policy.
•Occurrence policy: A policy that provides coverage for incidents that occur during the policy period, regardless of when the claim is made.
•Peril: A specific risk or cause of loss covered by an insurance policy, such as fire, theft, or windstorm.
•Policy period: The specified amount of time for which an insurance policy provides coverage.
•Premium: The amount paid by the policy holder to the insurance company for coverage, generally in the form of a monthly payment.
•Professional liability insurance (also known as errors and omissions): Coverage for claims resulting from professional mistakes or negligence.
•Property insurance: Coverage for damage to or loss of physical property owned by the business.
•Replacement cost: The cost to replace damaged property with new property of a similar kind and quality without deducting for depreciation.
•Rider: An amendment to an insurance policy that provides additional or modified coverage.
•Risk management: The process of identifying, assessing, and mitigating potential risks to minimize losses.
•Subrogation: The right of the insurer to recover the amount paid for a claim from a third party that is responsible for a loss, such as when a customer steals or causes property damage.
•Umbrella insurance: Additional liability coverage that extends beyond the limits of the underlying policies.
•Underwriting: The process by which an insurer evaluates the risks of insuring a business and determines the terms of coverage.
•Workers' compensation insurance: Coverage that provides medical benefits and lost wages to employees injured on the job.
•Waiver of Subrogation: An agreement by which the insured waives the right for the insurer to seek recovery from a third party responsible for a loss.
Don’t let insurance lingo lure you into a panic. Use this guide to better understand your policy and make informed decisions when it comes to claims and risk management.