21 Business Insurance Terms to Know in Canada

Here are the top 21 business insurance terms you should know:

1. Actual Cash Value (ACV)

Actual cash value (ACV) is the depreciated replacement cost of damaged or stolen property. It’s a method of valuing insured property that accounts for the item’s age and condition. In other words, what something is worth today, not what you paid for it.

When purchasing commercial property insurance, you’ll choose between a policy based on ACV or replacement value (RV), so it’s worth understanding both.

2. Replacement Value (RV)

RV, or replacement cost coverage, replaces or repairs damaged property with new items of similar kind and quality without deducting for depreciation. RV coverage reimburses a policyholder for the full cost of buying a new, equivalent item or property.

3. Additional Insured

Any person or organization that you add to your policy is considered an additional insured. Additional insureds are entitled to limited benefits under your policy and are insured for their third-party liability. Additional insureds are frequently used for general liability and commercial auto insurance policies.

4. Aggregate Limit

The aggregate limit, also known as a coverage or policy limit, is the maximum amount of money an insurance company will pay for an insurable loss during a policy’s one-year period. It applies to all covered losses. Once that limit is reached, the insurer will not pay for additional claims within the policy’s one-year period.

5. Binder

A binder is a document that serves as a temporary insurance policy until the full policy can be issued. As a business owner who has been issued a binder, you are fully insured unless told otherwise by your broker. Binders are typically issued for 30 days and dissolve once the full policy is issued.

6. Care, Custody, and Control

Care, custody, and control is a common policy exclusion that applies when you’re in possession of someone else’s property. When that property is in your care, you’re responsible for it – and if something happens to it, you could be held liable.

For instance, an auto repair shop has care, custody, and control over customers’ vehicles it’s servicing or storing. This exclusion applies to many types of insurance, so check your policy for what’s not covered. 

7. Certificate of Insurance (COI)

Also known as proof of insurance, a certificate of insurance is a one-page document issued by your broker summarizing the details of your policy. It confirms that you are actively insured. You will often be asked for this when you are leasing office space, signing a new contract, or getting a loan.

8. Claim and Claimant

A claim is a formal request to your insurer to cover losses or damages you’ve suffered, or to respond on your behalf if you’re named in a third-party lawsuit, as per your policy. If you file a claim, you are the claimant. 

9. Deductible

A deductible is the amount of money you, as the policyholder, pay after filing a claim before your insurance company pays. After you’ve paid the deductible, your insurance company will pay you for the remainder of the claim value (up to the policy’s limit). You can select the deductible amount in your policy, and the higher it is, the lower your annual premium will be.

10. Exclusion

An exclusion is a provision that removes coverage for certain risks, hazards, or events and outlines what is not covered by your policy. Exclusions are designed to help keep premiums affordable.

11. Grace Period

A grace period is the amount of time your insurer gives you to pay an overdue premium before revoking your coverage for non-payment. If you pay your premium monthly and miss a payment, the grace period is your window to catch up before your policy lapses. 

12. Liability

To be liable is to be held responsible by the law. Liability is insurance coverage that protects an individual or business if they are sued and found accountable by law, such as injury, malpractice, or property damage. A liability policy will typically cover your legal costs and payouts if you are found legally liable. Intentional damage and contractual liabilities are usually not included. Talk to a licensed broker to understand the limitations and restrictions of your policy.

13. Loss

A loss refers to damages to an insured property or item. For example, if a windstorm damaged your commercial property’s roof, that is considered a loss. Therefore, you can file a claim to recoup the cost of those damages, provided you have the coverage minus a deductible.

14. Named Insured

A named insured, or policyholder, is a person or company that owns an active insurance policy.

15. Perils

A peril is a specific risk or cause of loss that is covered by an insurance policy, such as fire, vandalism, or theft. Policies may feature named perils (a type of policy or coverage that only covers the perils named or listed in the policy), specific perils (events listed in that policy, such as fire, theft, windstorm, smoke, explosion, and vandalism), or all perils (covers all risks except those excluded from a policy).

16. Per Occurrence Versus Aggregate

A ‘per occurrence’ limit refers to the total amount an insurance company will pay for one incident, whereas an ‘aggregate’ limit applies to the total amount an insurance company will pay for multiple claims in one policy, usually over a year.

17. Policyholder

The policyholder is an individual or company that owns an insurance policy. So, as a business owner, if you’re the policyholder, you’re also the named insured. That means you own the policy, pay for it, choose the coverages, and can change or cancel it as you wish.

18. Premium

A premium is the amount of money you pay to the insurance company for your coverage. It may include a commission paid to a broker and additional fees to cover the cost incurred to write and manage the policy. A premium is typically paid annually or monthly.

19. Retroactive Date

A retroactive date is the start date of your first errors and omissions (E&O) insurance policy – also called professional liability insurance. As long as you carry continuous coverage with no gaps, that original date follows you to every new policy, even if you switch insurance companies.

Why does it matter? Because professional liability claims can surface years after the work was done.

For example, suppose an accountant first bought E&O insurance on January 1, 2024, giving them a retroactive date of January 1, 2024. In June 2025, they make a critical error in a client’s books. The client doesn’t notice until February 2026 and sues. Even if the accountant switched insurers between then and now, their retroactive date carried over, so the claim is covered.

20. Rider

Also referred to as an insurance endorsement, a rider is an add-on to a policy, such as adding, removing, or changing coverage to customize it to suit your business better. For example, some general liability insurance policies include product liability insurance. If they don’t, and your business sells products, you can add product liability insurance to them as a rider or endorsement.

21. Underwriter

An underwriter is an individual who evaluates an insurance application they receive from an insurance broker, assesses risks, and determines whether an insurer should provide coverage to the applicant or business owner. The underwriter decides a policy’s premium, coverage limits, and exclusions.    

Frequently Asked Questions About Business Insurance Terms

What’s the difference between actual cash value and replacement value?

Actual cash value (ACV) pays the depreciated worth of damaged or stolen property, factoring in age and wear. Replacement value (RV) pays the full cost of replacing it with a new item of similar kind and quality, with no deduction for depreciation. RV coverage typically costs more but pays out more after a loss.

What’s the difference between a per occurrence limit and an aggregate limit?

A per occurrence limit is the maximum your insurer pays for a single incident. An aggregate limit is the maximum it pays for all claims combined during the policy period, usually one year.

Does a higher deductible lower my business insurance premium?

Yes. The deductible is what you pay out of pocket before your insurer covers the rest of a claim. Choosing a higher deductible generally lowers your annual premium, though it means more upfront cost if you file a claim.

Get Help Understanding Your Business Insurance Policy 

You don’t need to memorize every term in this glossary – that’s what a licensed broker is for. It never hurts to have a conversation to ensure you understand exactly what’s in your policy, including its terms, conditions, and exclusions.

Whether you’re buying business insurance for the first time or shopping around before renewing, fill out our online application for a free quote. 

Our licensed brokers will help you get customized, comprehensive coverage at a low cost so you can focus on growing your business.

– Updated July 24, 2026.