Commercial Insurance Glossary
107 plain-English definitions of commercial-insurance terms. Reviewed by Jason Wootton, our California-licensed P&C Insurance Agent (CA License #0I94454).
Bond · 4 terms
A Fidelity Bond reimburses a business for losses caused by dishonest acts of employees — theft, embezzlement,…
A Payment Bond guarantees that a contractor will pay subcontractors, suppliers, and laborers on a project. Of…
A Performance Bond guarantees that a contractor will complete a project according to contract terms. Required…
A Surety Bond is NOT insurance — it's a financial guarantee that you'll complete contracted work and comply w…
Claims · 3 terms
A Claimant is the party making a claim under an insurance policy — either the policyholder (a first-party cla…
A Claims Adjuster is the insurance professional who investigates a claim, evaluates the damages or loss, appl…
Subrogation is the right of your insurer, after paying a claim on your behalf, to step into your shoes and pu…
Claims-Made Concept · 2 terms
Classification · 4 terms
Admitted carriers are licensed by state insurance regulators and backed by state guaranty funds. Non-admitted…
E&S Lines are commercial insurance markets that write coverage admitted carriers won't — high-risk classes, l…
NAIC Code (North American Industry Classification System) is a 6-digit code that identifies your business's i…
SIC (Standard Industrial Classification) is the older 4-digit US industry classification system, largely repl…
Commercial Auto · 4 terms
Collision covers damage to your vehicle from collision with another vehicle or object, regardless of fault.
Combined Single Limit (CSL) is a single dollar limit that covers bodily injury + property damage combined per…
Comprehensive covers damage to your vehicle from non-collision causes: theft, vandalism, fire, hail, falling…
MVR is a driver's state-issued driving history. Commercial Auto carriers underwrite based on the combined MVR…
Coverage Form · 1 term
Coverage Type · 22 terms
Builders Risk covers buildings under construction — materials, fixtures, and equipment on a job site — until…
Business Income coverage pays your lost revenue + ongoing expenses when a covered Property loss forces tempor…
Business Interruption Insurance (also called Business Income Insurance) covers lost net income and continuing…
A Business Owners Policy (BOP) bundles General Liability + Commercial Property + Business Income into one pol…
Commercial Auto covers vehicles used for business purposes — owned, leased, or hired. Personal auto policies…
Commercial Crime Insurance covers losses from employee theft, fraud, forgery, robbery, computer fraud, and fu…
Commercial Flood Insurance covers flood damage — explicitly EXCLUDED from standard Commercial Property and BO…
CGL is the formal name for the standard General Liability policy — Commercial General Liability. The ISO CGL…
A Commercial Package Policy (CPP) is a customizable bundle of any commercial coverages — GL, Property, Busine…
Commercial Property covers YOUR own property — building (if owned), business contents, equipment, inventory,…
Commercial Umbrella sits ABOVE General Liability + Commercial Auto + Employers Liability (WC Part B) — provid…
Cyber Extortion Coverage is a component of Cyber Liability insurance that pays for ransom demands, negotiator…
Cyber Liability covers data breach response costs, customer notification, regulatory penalties, and lawsuits…
Data Breach Insurance covers the costs a business incurs after a data security incident — notification to aff…
D&O covers personal liability of directors and officers for governance decisions, fiduciary breach, donor law…
EPLI covers claims by employees for wrongful termination, discrimination, harassment, or retaliation.
General Liability (GL) insurance covers third-party claims of bodily injury, property damage, and personal/ad…
Inland Marine covers high-value tools, equipment, and movable business property — whether at your shop, in tr…
Motor Truck Cargo Insurance covers the value of goods/freight being transported by a commercial vehicle — dis…
Pollution Liability covers cleanup costs and third-party claims for spills, contamination, or environmental d…
Professional Liability — also called Errors & Omissions (E&O) — covers claims of professional mistakes, bad a…
Workers Compensation (WC) is a state-mandated insurance that pays medical bills and lost wages when employees…
Distribution · 4 terms
A Captive Agent represents a single insurance carrier exclusively. They typically work directly for that carr…
An Independent Agent represents multiple carriers, allowing them to compare quotes across markets to find the…
A Managing General Agent (MGA) is a specialty wholesaler that has carrier authority to underwrite, bind, and…
A Surplus Lines Broker is a state-licensed intermediary who places insurance with non-admitted (Excess & Surp…
Document · 3 terms
An ACORD Certificate of Liability Insurance is a standardized one-page form (ACORD 25) that summarizes the ac…
A Certificate of Insurance (COI) is a one-page document issued by your carrier proving you have specified ins…
The Declarations Page is the first page (or first few pages) of an insurance policy that lists the named insu…
Endorsement · 13 terms
Additional Insured is a third party (landlord, client, vendor) named on your liability policy as also being c…
Additional Insured gets limited coverage rights on someone else's policy (typically for a specific operation)…
Earthquake Coverage is a separate endorsement or policy covering earthquake damage — explicitly EXCLUDED from…
Equipment Breakdown covers mechanical or electrical failure of business equipment — boilers, HVAC, computers,…
Garage Keepers Liability covers customer vehicles in your custody on your lot — theft, vandalism, weather dam…
HNOA extends Commercial Auto coverage to vehicles your business uses but doesn't own — employees' personal ve…
Liquor Liability covers claims arising from alcohol service — over-serving a customer who then injures someon…
MCS-90 is a federal financial responsibility endorsement required for interstate for-hire trucking under FMCS…
On-Hook covers damage to a vehicle being towed by your tow truck. Explicitly EXCLUDED by standard Commercial…
Ordinance or Law coverage pays the increased cost of rebuilding to current code when an older building is dam…
Primary and Noncontributory is a contract requirement that your liability policy must pay BEFORE any other po…
Products-Completed Operations covers claims that arise from products you sold or work you completed (after th…
Waiver of Subrogation prevents your insurer from suing a third party (typically a landlord or contracting par…
Exclusion · 1 term
Filing · 3 terms
BMC-91 is the FMCSA filing that proves you carry minimum financial responsibility for interstate for-hire tru…
MC Authority is the operating authority granted by FMCSA to motor carriers transporting passengers or freight…
USDOT Number is a federal registration number required for any commercial vehicle > 10,001 lbs GVWR operat…
General · 2 terms
Limits · 3 terms
Aggregate Limit is the maximum your policy will pay for ALL claims combined in a policy year.
Per-Occurrence Limit is the maximum your policy will pay for a single claim or incident.
Split Limit is an alternative to CSL where bodily injury and property damage have separate dollar limits — ty…
Policy Form · 14 terms
A Claims-Made policy responds when a claim is FILED during the policy period — not when the incident occurred…
A Consent to Settle clause requires the insurer to obtain the insured's approval before settling a claim. Pro…
Defense costs can be paid in ADDITION to the policy limit (outside — better) or COUNTED AGAINST the limit (in…
Drop-Down Coverage is an Umbrella feature where the umbrella drops down to provide primary coverage for claim…
Duty to Defend means the insurer pays defense costs from the moment a claim is filed — even if the claim is l…
Extended Reporting Period (ERP) — also called Tail Coverage — extends the claim-filing window after a Claims-…
Follows Form means an Umbrella or Excess policy adopts the terms, conditions, and exclusions of the underlyin…
A Hammer Clause gives the insurer the right to settle a claim against the insured's wishes — limiting the ins…
ISO Forms are standardized commercial insurance policy forms drafted by the Insurance Services Office and use…
A Monoline policy covers a single line of insurance — General Liability ONLY, or Commercial Auto ONLY, etc. O…
A Named Insured is a person or organization specifically listed on the policy declarations as an insured part…
An Occurrence policy responds to incidents that occurred during the policy period, even if claims are filed y…
Prior Acts Coverage (also called Nose Coverage) extends a Claims-Made policy backward to incidents that occur…
Retroactive Date is the earliest date back to which a Claims-Made policy will respond. Critical when switchin…
Process · 2 terms
Property · 3 terms
Actual Cash Value (ACV) is the lesser of repair cost OR replacement cost minus depreciation.
Coinsurance is a Commercial Property requirement to insure to at least 80% (sometimes 90%) of replacement cos…
Replacement Cost coverage pays to replace damaged property with new equivalent. Actual Cash Value (ACV) pays…
Regulatory · 2 terms
AB5 is California's strict employee-classification law using the ABC test. Has been a major driver of Workers…
FMCSA is the US Department of Transportation agency that regulates commercial vehicles operating in interstat…
Specialty Coverage · 1 term
Umbrella · 1 term
Workers Comp · 1 term
Workers Compensation · 10 terms
Workers Compensation has two parts: Part A (statutory medical + indemnity to injured employee, uncapped) and…
Experience Modifier is your Workers Comp claims-history multiplier. 1.00 is industry average. Below 1.00 = di…
A Lost-Time WC claim is one where the employee misses work beyond the state's waiting period (typically 3-7 d…
Mod Factor — also called Mod, EMR, or X-Mod — is the Workers Comp claims-history multiplier applied to base p…
Monopolistic State refers to a state where Workers Compensation can ONLY be purchased through the state fund.…
NCCI Class Codes are 3-4 digit classifications maintained by the National Council on Compensation Insurance t…
Schedule Mod is a discretionary premium credit (or surcharge) Workers Comp carriers apply outside the formal…
A State Fund is a state-administered Workers Comp insurer. Some are monopolistic (only WC option); some compe…
TTD = Temporary Total Disability (off work temporarily). TPD = Temporary Partial (modified-duty available). P…
WC Premium Audit is the annual end-of-policy review where the carrier compares actual payroll + class assignm…