Business Insurance Terminology

Business insurance terminology doesn’t have to be complicated. Understanding a few key terms can help you better understand your policy, evaluate coverage options and make informed decisions for your business.

Table of Contents

1. Business Insurance Glossary
2. Actual Cash Value (ACV)
3. Additional Insured
4. Aggregate Limit
5. Bodily Injury
6. Business Interruption Insurance
7. Business Property
8. Certificate of Insurance (COI)
9. Claim
10. Coinsurance
11. Commercial Auto Insurance
12. Commercial General Liability (CGL)
13. Commercial Property Insurance
14. Coverage Limit
15. Deductible
16. Direct Writer
17. Directors and Officers (D&O) Insurance
18. Employee Dishonesty Coverage
19. Endorsement
20. Errors and Omissions (E&O) Insurance
21. Equipment Breakdown Coverage
22. Exclusion
23. General Liability
24. Indemnity
25. Insurance Broker
26. Insured
27. Insurer
28. Named Insured
29. Non-Owned Auto Liability
30. Occurrence
31. Peril
32. Policy
33. Policy holder
34. Policy Period
35. Premium
36. Product Liability Insurance
37. Professional Liability Insurance
38. Proof of Insurance
39. Property Damage
40. Replacement Cost
41. Risk
42. Subrogation
43. Tenants Legal Liability
44. Third-Party Claim
45. Umbrella Liability Insurance
46. Underwriter
47. Workers' Compensation
48. Builder's Risk Insurance
49. Conclusion
50. FAQs

Business Insurance Terminology

Business insurance policies often include terms that may be unfamiliar, especially if you’re purchasing insurance for the first time. From deductibles and policy limits to liability and endorsements, understanding these terms can help you better understand your coverage and policy options.

This glossary breaks down common business insurance terminology, helping you navigate insurance-related conversations and make informed decisions about your business coverage.

Additional Insured 

A person or organization added to an insurance policy, who receives certain coverage under the policy, typically because of a business relationship or contract requirement. 

Aggregate Limit 

The maximum amount an insurer will pay for all covered claims during a policy period.

Bodily Injury

An injury sustained by a third party that may result in a liability claim against a business.

Business Interruption Insurance 

Coverage that helps replace lost income and pay ongoing expenses if a covered event temporarily disrupts business operations.

Business Property 

Physical assets owned by a business, such as furniture, computers, inventory, tools, and equipment. 

Certificate of Insurance (COI) 

A document that provides evidence that an insurance policy is active and summarizes key coverage details. 

Claim 

A formal request submitted to an insurance company for coverage following a loss, injury, damage, or other incident.

Coinsurance

A policy condition that requires a business to insure its property to a specified percentage of its value. If the property is underinsured and a covered loss occurs, the amount paid for a claim may be reduced.

Commercial Auto Insurance 

Coverage designed for vehicles used primarily for business purposes, helping protect against losses related to accidents, theft, or damage.

Commercial General Liability (CGL) 

One of the most common business insurance policies. It helps protect against third-party claims involving bodily injury, property damage, advertising injury, or personal injury resulting from business operations.

Commercial Property Insurance 

Coverage that helps protect a business’s physical assets—such as buildings, equipment, inventory, and tools — from covered risks like fire, theft, or vandalism.

Coverage Limit 

The maximum amount an insurer will pay for a covered loss under a policy or specific coverage section. 

Deductible  

The portion of a covered loss that the insured is responsible for paying before insurance coverage applies. 

Direct Writer

An insurance company that sells insurance directly to customers rather than through independent brokers.

Directors and Officers (D&O) Insurance 

Coverage designed to protect business directors, officers, and executives from claims alleging errors, omissions, or decisions made while managing the organization. 

Employee Dishonesty Coverage

Insurance that may help protect a business from financial losses resulting from theft or other dishonest acts committed by employees. 

Endorsement 

A written amendment that changes the terms, conditions, or coverage of an insurance policy. 

Errors and Omissions (E&O) Insurance 

Also called Professional Liability Insurance. It helps protect businesses and professionals from claims alleging negligence, mistakes, or failure to provide professional services as expected. 

Equipment Breakdown Coverage

Coverage that may help protect against losses resulting from unexpected mechanical, electrical, or electronic failures that are not typically covered under a standard property insurance policy.

Exclusion

A situation, condition, or type of loss that is specifically not covered by an insurance policy.

General Liability

A shortened term commonly used to describe Commercial General Liability insurance.

Indemnity

The insurance principle of restoring an insured to roughly the same financial position they were in before a covered loss occurred.

Insurance Broker

A licensed insurance professional who helps clients purchase insurance from one or more insurance companies.

Insured

The individual, company, or organization protected by an insurance policy.

Insurer

The insurance company providing coverage under the policy.

Named Insured

The individual or business specifically listed on the insurance policy as the primary insured.

Non-Owned Auto Liability

Coverage that may help protect a business from liability when employees use personal vehicles for work-related activities.

Occurrence

An accident, event, or incident that may give rise to an insurance claim.

Peril

A specific cause of loss, such as fire, windstorm, theft, or vandalism.

Policy

The legal contract between the insurer and the policyholder; it outlines coverage, exclusions, limits, and responsibilities.

Policyholder

The individual or business that owns the insurance policy and has the contractual relationship with the insurer.

Policy Period

The length of time during which an insurance policy remains in force.

Premium

The amount paid to an insurer in exchange for insurance coverage.

Product Liability Insurance

Coverage that helps protect a business against claims that a product it manufactured, sold, or distributed caused injury or damage.

Professional Liability Insurance

Also known as Errors and Omissions Insurance, this coverage helps protect businesses and professionals against claims related to errors, omissions, negligence, or inadequate professional services. 

Proof of Insurance

Documentation used as evidence that insurance coverage is in place. Common examples include a pink card for auto insurance or a Certificate of Insurance (COI) for business insurance.

Property Damage

Physical damage to someone else’s property resulting from a business’s operations, products, or activities.

Replacement Cost

The amount required to repair or replace damaged property with a similar item at current market prices, without deducting for depreciation.

Risk

The possibility that an event or circumstance could result in a loss.

Subrogation

The insurer’s right to recover claim costs from a responsible third party after paying a covered loss. 

Tenants Legal Liability

Coverage that may help protect a business if it becomes legally responsible for damage to premises it rents or leases.

Third-Party Claim

A claim made by a person or organization seeking compensation for injury, damage, or loss allegedly caused by a business.

Umbrella Liability Insurance

Additional liability coverage that extends beyond the limits of underlying policies, such as CGL or commercial auto insurance.

Underwriter 

An insurance professional who evaluates risk and determines whether coverage should be offered and under what terms.

Workers’ Compensation

A government administered program that provides benefits to employees who are injured or become ill due to work-related causes.

Builder’s Risk Insurance

Coverage that helps protect construction or renovation projects, materials, and equipment against certain types of loss or damage while work is underway.

Every business faces unique risks, and insurance needs can vary depending on your operations, industry, and goals. Understanding common insurance terminology can help you feel more prepared when evaluating coverage options and discussing your needs with an insurance advisor.

For flexible, personalized commercial insurance options for your business, speak to a Licensed TD Insurance Advisor today at (1-855-724-2883) or learn more here.