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Insurance Terminology
Accounts Receivable
Protects you if you are unable to collect outstanding balances as a result of
loss or damage to your account records.
Actual Cash Value (ACV)
ACV of property is calculated by determining what it would cost to
replace the property and then adjusting this replacement cost by subtracting an
amount that reflects depreciation.
Advertising & Personal Injury
Covers legal defense costs and damages from lawsuits that claim false,
malicious or misleading statements, advertisements, promotional flyers or
brochures, web sites, etc. Includes claims that copyright, title, or slogan
rights have been violated.
Audit
The process an insurance company uses to compare whether the premium it
originally estimated reflects the actual risk covered by the policy based on
the customer's actual payroll, number of autos or sales.
Audit Period
The period covered by an insurance audit. This is usually the year the
policy has been in effect. If an insurance premium is going to be determined by
audit, the insurance company will conduct their examination of the business's
books and records at the end of the policy period.
Blanket Limits
(1) A way of increasing the limits on your individual coverages
without increasing your premium. With a blanket limit, the limits for several
common coverages are bundled together in the policy under one blanket limit
(say, $150,000 for six coverages). That way, the full blanket limit would apply
if any one of the blanketed coverages should have a loss, instead of the usual
lower limits per coverage of about $10,000-$25,000.
(2) Covers multiple buildings at different locations under the same limit. That
way, even if there are large shifts of inventory from one location to another,
the policyholder is covered for maximum inventory worth.
Bodily Injury
Physical injury to a person.
Building and Contents
Covers your shop, warehouse or office structure and contents if they
are damaged or destroyed because of a covered loss.
Business Income
Reimburses you for lost earnings if your business is forced to shut down
because of a fire, windstorm, explosion or other insured loss. Also covers
extra expenses, such as renting temporary space.
Business Income for Off-Premises Utility Services
Protects against loss of business income or extra expense at your business
caused by interruption of water, communication or power supply services, when
the interruption is caused by a covered loss.
Business Owners Policy
A simplified property and liability policy created for owners of small
businesses which combines most of the coverages they will need. It does not
include workers’ compensation or commercial automobile coverages.
Commercial Auto Liability
Auto coverage that applies if the insured business is responsible for
bodily injury or damage to another’s property as a result of an auto accident.
Completed Operations
Pays for losses resulting from bodily injury or property damage that takes
place away from the insured’s premises and is caused by work finished by the
insured’s business and/or the materials included in that work.
Computers and Media
Provides coverage for damage to your computers, computer equipment,
data, software, and other business electronic equipment. Also covers the costs
to research, replace or repair lost or damaged data or software when the damage
has been caused by a covered loss.
Covered Loss
Any insured loss which is either expressly specified or not excluded
in your policy language.
DBA
Abbreviation that stands for “doing business as.”
Declarations Page
The declarations page contains the basic information of your policy.
It shows the policy number, named insureds, effective dates, premium amounts
and summary policy information.
Deductibles
Typically, the standard deductible on a business owners policy is $250.
Optional deductibles of $500, $1,000, $2,500, and $5,000 are usually available.
The higher deductibles will generate a credit to your policy premium. The
deductible applies to all losses or damages arising out of any one occurence.
Defense Costs
A business owners policy typically covers the cost of legal defense
for liability coverages included in the policy. Defense costs may be paid over
and above the policy limits.
Dependent Property
Protects you against loss of business income that occurs because a major
supplier cannot provide you with the essential materials for your business.
This coverage is triggered by a covered loss to a supplier’s property. It also
provides reimbursement for loss of business if a property such as an anchor
store which your business depends upon to bring you business suffers a covered
loss.
Depreciation
Loss in value that occurs as items age, wear out, or become obsolete.
Employment Practices Liability Insurance (EPLI)
This coverage provides employers protection for liability connected with hiring
and personnel issues such as discrimination, sexual harassment and wrongful
termination.
Endorsement
An addition or limitation to an insurance policy that changes some aspect of
the insurance contract.
Equipment Breakdown
Covers costs to repair or replace equipment vital to your business,
such as computers, air conditioners, phone systems and boilers that are damaged
by mechanical breakdown.
Errors & Omissions
This coverage reimburses customers for economic loss when an insured
business makes an error or fails to act in accordance with the standards
applicable to the particular industry. Examples of some of those businesses
that may benefit from this type of coverage are engineering, banking, printing
and claims adjusting.
Exposure
Being at risk of loss because of some hazard or contingency.
First Named Insured
The first individual or organization named on an insurance policy. This entity
may have certain rights and obligations by virtue of being the first named
insured.
Full Value Replacement Cost
The cost to replace the insured property, which is not subject to the
limit of insurance identified on the policy. This coverage has additional
requirements that can be explained by your insurance agent.
High Liability Limits
These optional policy limits are higher than the standard business
owners policy limits. In certain industries, higher limits are sometimes
required in order to be eligible to bid for jobs.
Hired Auto and Non-Owned Auto Coverage
Covers auto liability for a business that does not own vehicles but sometimes
leases them. It also covers auto liability when an employee drives his/her own
vehicle to perform tasks related to the insured’s business.
Indemnify, Indemnification
To restore the insured to the same financial condition enjoyed before
the loss.
Inspection Contact
The individual who is contacted in the event of an audit, physical inspection
of your premises, or claim. This contact is usually the first named insured on
the declarations page of your policy.
Liability Insurance
Broad category of insurance that covers accidental bodily injury or property
damage losses for which the insured is legally responsible.
Legal Entity
A person or organization with a separate and distinct existence for
legal or tax purposes.
Lessor
One who conveys property to another by lease.
Medical Expense Coverage
Insurance that covers expenses for medical treatment without regard to fault.
Its purpose is to get the injured party taken care of as soon as possible.
Named Insured
An insured specifically named in the policy.
Off-Premise Utility Services
Covers damage to your property and stock caused by interruption of off-premises
water, communication or power supply services not owned by you.
Operations Liability
Covers your liability for injuries to people and their property that occur when
you are conducting your normal business at another location.
Peak Season
Provides an increased insurance limit for your business content to
cover seasonal variations in your inventory and supplies.
Personal Injury
Injury other than physical injury to a person. See advertising &
personal injury coverage.
Personal Property of Others
Provides protection for property belonging to your customers or suppliers while
in your shop or business, without regard to legal liability.
Premium
The price of insurance coverage provided for a specified period of time.
Premises
The building, its contents, and grounds that are covered under the insurance
policy.
Premises Liability
Covers your liability for injuries to people and damage to their property while
on your insured business property.
Premium Audit
The periodic (usually annual) review of an insured's books and records to
determine the exact amount of premium owed. (See audit.)
Products Liability
A coverage related to the responsibility of a merchant or manufacturer for his
or her products. If there is some defect in the product that was sold or
manufactured and it injures someone or damages his or her property, this
coverage protects the merchant or manufacturer responsible for that product.
Product Recall & Replacement
Coverage that pays for the expenses incurred when a product must be recalled
from the market as well as the costs of replacement parts or products.
Products and Completed Operations
A coverage which combines the product liability and completed operations
coverages.
Professional Liability
Coverage for liability arising out of errors or omissions in the
performance of professional duties in certain professions, such as doctors,
lawyers, dentists and architects. It typically includes coverages for bodily
injury, property damage and financial damages.
Property Insurance
Broad category of insurance which covers accidental economic losses to the
insured’s property.
Replacement Cost
The cost to replace lost or damaged property subject to the limit of insurance
on the policy.
Temperature Change
Covers loss of your perishable stock when there is direct damage caused by
interruption of electric power to, or mechanical breakdown of, your
refrigerating or cooling equipment.
Tenant’s Liability
Protects a tenant business if it is responsible for a covered damage to the
leased building it occupies or property belonging to other tenants in that
building.
Umbrella Policy
Additional insurance that kicks in once you've reached the limit of your basic
policy. For example, if you suffered a $1 million dollar loss, and your
property insurance covers $500,000, an umbrella policy could cover the
remaining $500,000.
Underwriter
In insurance companies, an individual responsible for determining
which coverages will be made available and on what terms, and how premiums will
be set.
Valuation
There are three forms of valuation used on business owners policies.
• Actual Cash Value
• Replacement Cost
• Full Value Replacement Cost All of these are defined in this glossary.
Vandalism
Covers willful or malicious damage or destruction of property.
Workers’ Compensation
A type of insurance that provides benefits to workers if they become
sick or injured on the job.
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