Insurance terms and what they really mean
3 minute read
Navigating the world of insurance can be complicated, especially when you’re unfamiliar with the terminology. However, it’s important that you know the specifics of your coverage, when it applies, and what steps you need to take in the unfortunate event of a loss or claim. But insurance terms can be confusing, and you can run into trouble when you don’t fully comprehend what a word or phrase is describing.
That’s why we’ve simplified the most common insurance terms to help you confidently navigate your policy and make more informed insurance decisions. So, whether you’re a seasoned policyholder or shopping around for insurance, here are some key terms and phrases you should know:
Commercial general liability (CGL) insurance: Commercial general liability insurance is designed to protect you and your business from a loss if you’re found legally liable for 3rd party bodily injury or property damage as a result of your operations, the products you sell, or the services you provide. CGL insurance can also offer protection where you or your employees are conducting business offsite.
Product Liability: If your business produces or sells any sort of product, product liability insurance is a necessity for you. As a business owner, you’re responsible for every product you make and sell. If one of those products is faulty, or causes some sort of injury, your business could be held accountable for the consequences that follow. Product liability coverage typically forms part of the CGL coverage form, however, it’s always best to make sure that it does!
Professional liability: If one of your clients or customers claims they suffered a loss because of errors in your work or a missed deadline, you would need to look to a professional liability or Errors & Omissions coverage form to respond. These forms may help cover legal costs and expenses associated with these types of claims. Important to note that professional services are excluded under the CGL coverage form.
Occurrence: The specific moment in time when a loss takes place. This may differ from when the loss is reported.
Hazard: A condition or situation that increases the likelihood of a loss occurring. An icy walkway is a hazard that increases the likelihood of a customer slipping and falling and hurting themselves.
Property insurance: This coverage is designed to respond to situations where property your business owns, things like buildings, stock and equipment, are damaged by an insured peril.
Business Interruption Insurance: This coverage helps support your business when it’s temporarily closed or unable to operate due to a covered loss. It will help cover lost business income and continuing normal operating expenses, so you can get your business back up and running again.
Accounts receivable coverage: If your business is unable to effect collection of sums due from customers as a direct result of loss of or damage to records of accounts receivable (caused by an insured peril), accounts receivable coverage may help protect your bottom line and maintain your cash flow.
COPE: An acronym that stands for construction, occupancy, protection, and exposure. These are the main risk characteristics considered when assessing a physical property location for insurance purposes.
Peril: An event that causes loss or damage. A property coverage form details perils that are covered (insured perils) and perils that are excluded (excluded perils). Insured perils often include things like Fire or Lightning, Windstorm or Hail and theft to name a few.
Deductible: This is the amount of money you have to pay out-of-pocket towards an insured loss.
Depreciation: The decrease in value of an asset over time. Factors such as wear and tear, usage, or obsolescence are examples of what can impact the actual cash value of some types of property over time.
Insurance to value: The concept of making sure that your property insurance coverage limit aligns with 100% of the cost it would take to replace it. As a policyholder, it’s your responsibility to adjust your coverage accordingly to ensure that you are fully protected.
Coinsurance clause: This clause states the amount of insurance coverage you must purchase in order to avoid being a co-insurer, or more simply stated, to avoid sharing the loss with your insurance company.
Replacement cost: The amount of money it will cost to replace your damaged item.
Adjuster: If you should happen to have to submit a claim, the adjuster is the person who investigates that claim on behalf of the insurance company. They’ll determine whether or not there is coverage under your policy, and if there is coverage, the loss amount or damages that are covered.
Navigating your Insurance Policy
Although it helps to be familiar with some of the terminology, you don’t have to be an insurance expert to get the right coverage for your business. At TruShield, we’ll work with you to make sure your insurance policy addresses your business’s unique risks, and we’re here to help with questions or concerns you may have. Learn more by visiting our business insurance page today!
This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information.
