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Top 100 Commercial Insurance Terms You Need to Know

By June 26, 2025No Comments

From a licensed insurance agent who speaks your language

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Commercial insurance is vital to protecting your business, but the terminology can be intimidating. Whether you’re reviewing your Business Owner’s Policy, purchasing Cyber Liability coverage, or navigating Workers’ Comp, understanding the lingo is essential. This glossary breaks it all down clearly, concisely, and from the perspective of someone who helps business owners like you every day.

Property & Equipment Coverage

  1. Actual Cash Value (ACV) – Replacement cost minus depreciation.
  2. Replacement Cost (RC) – Cost to replace damaged property with new items, no depreciation.
  3. Business Personal Property (BPP) – Equipment, inventory, and furniture not part of the building.
  4. Building Coverage – Insurance for the physical structure in which your business operates.
  5. Tenant Improvements & Betterments – Upgrades made by tenants, covered under certain policies.
  6. Equipment Breakdown – Covers mechanical or electrical failure of equipment.
  7. Spoilage Coverage – Covers perishable goods lost due to equipment failure or power outages.
  8. Inland Marine – Covers property in transit or off-site (like tools at a job site).
  9. Bailee’s Coverage – Protects customer property in your care (e.g., dry cleaner, repair shop).
  10. Ordinance or Law Coverage – Covers the cost to rebuild to modern code.
  11. Open Perils – Covers all causes of loss unless specifically excluded.
  12. Named Perils – Covers only what’s specifically listed.
  13. Flood Insurance – A Separate policy to protect against flood damage.
  14. Earthquake Insurance – Optional coverage for seismic-related loss.
  15. Coinsurance Clause – A penalty if you underinsure the value of your property.

Commercial Auto

  1. Business Auto Policy (BAP) – The standard policy for business vehicles.
  2. Symbol 1 – Any Auto – Broadest auto coverage available.
  3. Symbol 7 – Specifically Described Autos – Coverage only for vehicles listed on the policy.
  4. Hired Auto Coverage – Covers rented vehicles used for business.
  5. Non-Owned Auto – Covers employee-owned vehicles used for business purposes.
  6. Collision Coverage – Pays for damage to your vehicle in an accident.
  7. Comprehensive Coverage – Covers non-collision losses (theft, vandalism, hail, etc.).
  8. Medical Payments – Covers medical bills for you and passengers.
  9. Uninsured/Underinsured Motorist – Covers you if the other party has insufficient or no insurance.
  10. Garagekeepers Insurance – For businesses storing or repairing customer vehicles.
  11. Trailer Interchange – Covers trailers swapped under an agreement between truckers.
  12. Drive Other Car (DOC) – Extends coverage to business owners driving non-business vehicles.
  13. Fleet Policy – One policy for multiple business-owned vehicles.
  14. MCS-90 Endorsement – Required for interstate trucking; ensures financial responsibility.
  15. Physical Damage – Covers actual vehicle damage regardless of who’s at fault.

General Liability Insurance (CGL)

  1. Premises Liability – Coverage for accidents that happen on your property.
  2. Products Liability – Protection if a product you made/sold causes harm.
  3. Completed Operations – Covers issues arising from completed work (like a faulty roof installation).
  4. Personal and Advertising Injury – Includes libel, slander, and copyright infringement.
  5. Medical Payments to Others – No-fault coverage for injuries on your premises.
  6. Fire Damage Legal Liability – If you rent and accidentally cause a fire.
  7. Aggregate Limit – The maximum your policy pays during the policy period.
  8. Occurrence Limit – The most your insurer will pay per incident.
  9. Blanket Additional Insured – Automatically covers third parties if required by contract.
  10. Contractual Liability – Assumed liability under a contract.
  11. Liquor Liability – Coverage for businesses that serve alcohol.
  12. Host Liquor Liability – For non-liquor businesses hosting events.
  13. Vicarious Liability – Liability for the actions of employees or contractors.

Workers’ Compensation

  1. Medical Benefits – Covers work-related medical treatment.
  2. Wage Replacement – Pays part of the employee’s wages while unable to work.
  3. Rehabilitation Services – Covers therapy or retraining after a workplace injury.
  4. Death Benefits – Pays surviving dependents if an employee dies on the job.
  5. Employer’s Liability – Protects you from lawsuits by employees outside workers’ comp.
  6. Experience Modification Rate (EMR) – A score that affects your workers’ comp premiums.
  7. Assigned Risk Pool – A market for businesses that can’t get coverage in the standard market.
  8. Occupational Illness – Illnesses that develop due to workplace exposure.
  9. Return-to-Work Program – Helps injured employees transition back into the workforce.
  10. Independent Contractor – May not be covered under your workers’ comp unless misclassified.

Commercial Umbrella Insurance

  1. Excess Liability – Kicks in when other policies reach their limits.
  2. Follow Form – Mirrors the terms of the underlying policy.
  3. Self-Insured Retention (SIR) – Deductible-like amount you pay before the umbrella kicks in.
  4. Drop-Down Coverage – An umbrella coverage that fills gaps in primary policies.
  5. Aggregate Limit – Maximum amount the umbrella will pay for all claims.

Cyber Liability Insurance

  1. Data Breach Response – Covers costs like notification, PR, and credit monitoring.
  2. Business Interruption (Cyber) – Lost income due to a cyber event.
  3. Cyber Extortion – Ransom payments demanded by hackers.
  4. Forensic Investigation – Determines how the breach occurred.
  5. Social Engineering Fraud – Covers tricking employees into transferring funds.
  6. Bricking – Replacing devices rendered unusable after a cyberattack.
  7. Regulatory Fines – Covers penalties from privacy law violations (e.g., GDPR, HIPAA).
  8. Media Liability (Digital) – Covers online defamation or copyright infringement.
  9. Phishing Attack Coverage – Helps if an employee is duped into clicking a malicious link.
  10. Technology Errors & Omissions (Tech E&O) – Covers tech firms when their services fail.

Professional Liability (E&O) / Directors & Officers (D&O)

  1. Errors and Omissions (E&O) – For mistakes made while providing a professional service.
  2. Negligence – Failing to provide the expected level of care.
  3. Breach of Duty – Failing to fulfill professional obligations.
  4. Claims-Made Policy – Must be active when the claim is made.
  5. Occurrence Policy – Covers incidents during the policy period, even if the claim comes later.
  6. Retroactive Date – The date from which your E&O/D&O coverage applies.
  7. Tail Coverage – Extends the reporting window after your policy ends.
  8. Consent to Settle Clause – Requires your approval before the insurer settles a claim.
  9. Defense Outside the Limits – Legal costs don’t eat into your liability limit.
  10. Directors and Officers Liability (D&O) – Protects business leadership against lawsuits for decisions made on behalf of the company.
  11. Side A Coverage – Direct protection for directors/officers.
  12. Side B Coverage – Reimburses the company for indemnifying leadership.
  13. Side C Coverage – Entity coverage for securities-related claims.

Employment Practices Liability (EPLI)

  1. Wrongful Termination – Covers claims from fired employees.
  2. Discrimination – Covers claims based on race, gender, age, etc.
  3. Harassment – Sexual or workplace harassment claims.
  4. Retaliation – Claims from employees punished for asserting their rights.
  5. Third-Party EPLI – Coverage for non-employees (vendors/customers) alleging misconduct.
  6. Wage & Hour Defense – Limited defense coverage for FLSA disputes.
  7. Employee Handbook Review – Often recommended to reduce exposure.
  8. EEOC Investigation Costs – Covers defense against Equal Employment Opportunity claims.

Crime, Fidelity & Miscellaneous

  1. Employee Dishonesty – Theft or fraud by an employee.
  2. Forgery or Alteration – Fraud involving checks or documents.
  3. Theft of Money & Securities – On-premises or in transit.
  4. Computer Fraud – Unauthorized transfer of funds using a computer.
  5. Funds Transfer Fraud – Trick or hack causing unauthorized wire transfers.
  6. Social Engineering – Covered under specialized endorsements, not always included.
  7. Commercial Surety Bond – Guarantee of performance for contracts or services.
  8. Fidelity Bond – Protects against employee theft.
  9. Blanket Bond – Covers all employees under one policy.
  10. Notary Errors – Protects licensed notaries from liability.

General Terms & Concepts

  1. Policy Declarations Page – The summary sheet with limits, premiums, and coverages.
  2. Endorsement – A policy modification or add-on.
  3. Certificate of Insurance (COI) – Proof of coverage often required by clients.
  4. Indemnity – Restoring someone to their original financial position after a loss.
  5. Subrogation – The insurer’s right to recover costs from a responsible third party.
  6. Waiver of Subrogation – Waives the insurer’s recovery rights—often required in contracts.

Not all coverages or terms will apply to every policy. If you want personalized help deciphering your policies or finding the right coverage for your business, let’s connect. Our team would be happy to explain what matters most to your unique situation, and make insurance make sense.

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To get started searching for a new, and better insurance policy, contact our team today. Our knowledgeable agents at Keslar Insurance Agency are always ready to answer your questions and assist you in finding a policy that meets your needs. We’re even able to help you in the unfortunate event that you need to make a claim, and can assist you with your other insurance needs, as well.

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