Business Insurance Terms Explained
Insurance policies often use specialized terminology that can make coverage difficult to understand. This guide explains common business insurance terms in plain language so small business owners can better understand how policies work.
If you are new to commercial insurance, you may also want to read the Small Business Insurance Guide or start with General Liability Insurance Explained.
Aggregate limit
The aggregate limit is the maximum amount an insurance policy will pay during the policy period. Once the aggregate limit is reached, the insurer may not cover additional claims until the policy renews.
Additional insured
An additional insured is a person or organization added to a policy so they receive certain protections under that coverage. Businesses often add clients, property owners, or project partners as additional insureds under contracts. Learn more in Additional Insured Explained.
Certificate of insurance
A certificate of insurance (COI) is a document that summarizes an insurance policy’s key details, such as coverage types, limits, and policy dates. It is often required in business contracts. See Certificate of Insurance Explained.
Deductible
A deductible is the portion of a covered loss the policyholder must pay before insurance coverage begins. Higher deductibles often reduce insurance premiums. See Commercial Insurance Deductibles Explained.
Exclusion
An exclusion identifies a type of loss or situation that the policy does not cover. Exclusions help define the boundaries of coverage. Learn more in Insurance Exclusions Explained.
Indemnification
Indemnification refers to an agreement where one party agrees to compensate another party for certain losses or liabilities. These clauses are common in commercial contracts. See Indemnification Clauses Explained.
Occurrence vs claims-made
Some liability policies provide coverage based on when an event occurred, while others provide coverage based on when a claim is filed. Understanding the difference can be important when evaluating coverage.
Premium
The premium is the amount paid to maintain an insurance policy. Premiums are usually paid monthly, quarterly, or annually.
Umbrella coverage
Umbrella insurance provides additional liability protection above the limits of underlying policies such as general liability. See Commercial Umbrella Insurance Explained.
Coverage limit
A coverage limit is the maximum amount the insurer will pay for a covered claim. Businesses often review limits carefully when signing contracts or evaluating risk exposure. See Business Liability Limits Explained.