1. Actual Cash Value (ACV)
ACV is the depreciated replacement cost of damaged or stolen property. It is a method of valuing an insured property, while considering the property’s or item’s age and condition. ACV is not equal to the replacement cost value of a property. It is a calculation of how much something is worth over its expected lifetime.
2. Additional Insured
Any person or organization that you add to your commercial policy is considered an additional insured. By including an additional insured to your policy, you are extending your coverage to them. For example, if you’re a contractor, you may be asked to extend your liability coverage to the firm that is hiring you for a particular project.
3. Aggregate Limit
The aggregate limit is the maximum amount of money an insurance company will pay for your covered losses during a policy’s one-year period.
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.
5. Business Owner’s Policy (BOP)
A BOP is a policy package that includes several types of insurance policies at a discounted rate. A BOP usually includes commercial general liability (CGL) and commercial property coverage, but it may also cover several other foundational business policies, like professional liability (also known as errors and omissions insurance). A BOP is a good insurance policy for small businesses to consider as it provides a variety of coverages at a bundled price.
6. Care, Custody, and Control
When you are in possession of someone else’s property, you are responsible for it. In other words, you have ‘care, custody, and control’. For instance, an auto repair shop has the care, custody, and control over their customers’ vehicles they are servicing or have stored on their property.
7. Certificate of Insurance (COI)
Also known as proof of insurance, a COI is a one-page document issued by your broker summarizing the details of your policy. It confirms you are actively insured. You will often be asked for this when you are getting office space, signing a new contract, or getting a loan.
8. Claim and Claimant
A claim is when you request your insurer to cover any losses or damages you suffer, or if you’re named in a third-party lawsuit, as per your policy. If you file a claim, that makes you the claimant.
A deductible is the amount of money you, as the insured, pay in an insurance claim before your insurance coverage kicks in after filing a claim. 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.
An exclusion is a statement in your policy that outlines things that your policy does not cover. Insurance agreements can be very broad, so exclusions are used to clarify the exact scope of your policy.
11. Grace Period
If you pay your annual insurance premium monthly, but miss a payment, the grace period is an amount of time your insurer will give you to pay your bill before it revokes your coverage for failing to pay.
To be liable is to be held responsible by the law. In the world of insurance, liability refers to insurance coverage that protects an individual or business in the event they are sued and found responsible by law, such as an injury, malpractice, or property damage. If you are found legally liable, a liability policy will typically cover your legal costs and payouts. Intentional damage and contractual liabilities are usually not included. Talk to a licensed broker to understand what the limitations and restrictions of your policy are.
A loss refers to damages to an insured property or item. For example, if a windstorm damaged the roof of your commercial property, that is considered a loss. Therefore, you may be able to file a claim with your insurance provider to recoup the cost of those damages, minus a deductible.
14. Named Insured
A named insured is a person or company that owns an active insurance policy and to whom the policy will provide it’s coverage.
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, which includes a specific list of risks, or all perils, which covers all perils or risks except those expressly excluded.
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.
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 make changes.
A premium is the amount of money you pay to the insurance company annually for your insurance coverage. The premium you pay may include a commission paid to a broker, and separate fees to cover the cost incurred to write and manage the policy.
19. Replacement Cost
The replacement cost, or replacement value, is the amount of money it takes to replace a property or item that has been severely damaged with one of the same or higher value. Insurance companies use replacement costs to determine the value of an insured item.
Also referred to as an insurance endorsement, a rider is an adjustment to the terms and conditions of a policy, such as additional benefits or restrictions.
An underwriter is a person or organization that evaluates and assumes another party’s risk for a fee, such as an annual premium.