Plain-English definitions of the terms that come up daily on a commercial lines desk. Built for account managers, agency staff, and anyone working around U.S. insurance who wants the practical version, not the textbook one.
A person or organization, other than the named insured, who is granted coverage under a policy. Common in construction and lease agreements where one party requires coverage from another's policy. Practical note: the language matters; "blanket additional insured" endorsements are very different from scheduled additional insureds.
The maximum the insurer will pay for all covered losses during the policy period, regardless of the number of claims. Once exhausted, no more coverage applies even if the policy is still active.
A carrier licensed and approved by the state insurance department to write business in that state. Backed by the state guaranty fund. Distinguished from non-admitted (E&S) carriers.
An end-of-policy review where the carrier reconciles actual payroll and class codes against the estimates the policy was bound on. Can result in additional premium owed or a refund.
A package policy combining property, general liability, and business interruption coverage for small to mid-sized businesses. Designed for low-hazard operations; not available for high-risk industries.
Property coverage on a structure during the course of construction, renovation, or repair. Covers materials, fixtures, and equipment to be installed. Typically written on a project basis.
A temporary written agreement of coverage issued before the policy itself is delivered. Has the same effect as the policy until it expires (usually 30-90 days) or the policy is issued.
A document evidencing that an insurance policy is in force. Used to satisfy contractual requirements with vendors, landlords, and subcontractors. The COI itself does not modify or extend coverage; the underlying policy controls.
A numeric classification assigned to a workers' comp risk based on the type of work performed. Drives the rate per $100 of payroll. Misclassification is one of the most common audit disputes.
Automobile coverage for vehicles used in business. Distinct from personal auto in scope, limits, and rating. Includes hired and non-owned auto endorsements for vehicles not titled to the named insured.
The amount the insured pays out of pocket on a covered claim before the carrier's coverage kicks in. Higher deductibles lower premium; lower deductibles raise it.
The first page of a policy summarizing the named insured, policy period, limits, deductibles, and premium. Often the only page anyone reads. Get it right.
Professional liability coverage protecting service providers (including agents and brokers) from claims of negligent acts, errors, or omissions in the conduct of their business.
Excess & Surplus lines. Coverage written by non-admitted carriers for risks the admitted market won't take. Not backed by the state guaranty fund. Premium is typically higher and coverage forms vary.
A written modification to a policy that adds, deletes, or changes coverage. Issued mid-term to reflect changes in the insured's operations. Each one needs to be documented and the insured advised.
Coverage for bodily injury and property damage caused by the insured's operations, products, or completed work. The foundation policy of nearly every commercial program.
Coverage for vehicles the insured rents (hired) or doesn't own but uses for business (non-owned, like employees' personal cars used for errands). Often overlooked; often the source of E&O claims when overlooked.
A market cycle where carriers raise rates, tighten underwriting, and decline classes of business. Renewals get harder. Specialty markets fill the gap.
Property coverage for goods in transit, contractor's tools and equipment, fine arts, and other movable property. Despite the name, almost nothing about it is marine.
Insurance Services Office. The organization that develops standardized policy forms and rating data used across most carriers. When a carrier "uses ISO forms," they're using these standards.
The maximum the insurer will pay on a covered claim. Can be per-occurrence, per-claim, or aggregate. Read the declarations carefully — multiple limit structures often apply.
Losses paid plus reserves divided by premium earned. The carrier's profitability metric on a book of business. Influences renewal pricing across an entire portfolio.
A claims history report from a carrier showing all losses, reserves, and payments over a defined period (usually 5 years). The single most important document in renewal underwriting.
A multiplier applied to a workers' comp premium based on the insured's claims history relative to peers. 1.0 is average. Below 1.0 saves money; above 1.0 costs more.
A specialized intermediary with binding authority on behalf of one or more carriers. Often handles specific niches (E&S, programs) the carrier doesn't service directly.
A custom endorsement drafted to address a unique exposure not covered by standard form language. Written from scratch rather than pulled from ISO templates.
The person or entity specifically named on the declarations page. Has the broadest rights under the policy. The first named insured (when multiple are listed) has additional rights and responsibilities.
A liability policy that responds to claims arising from incidents that occurred during the policy period, regardless of when the claim is filed. Distinguished from claims-made coverage.
Endorsement language requiring the insured's policy to respond first and not seek contribution from any other applicable coverage. Routinely required in construction contracts.
The amount paid for coverage. Calculated from rate (per unit of exposure) times exposure (payroll, sales, vehicles, square footage). Adjusted by experience modification and credits/debits.
The continuation of a policy at the end of its term. Not automatic; requires the carrier to offer continued terms and the insured to accept. Renewal underwriting can result in non-renewal, rate increases, or coverage changes.
The carrier's estimated future payment on an open claim. Set by the claims adjuster based on facts known. Reserves move as new information emerges; total incurred = paid + reserved.
The carrier's right to pursue recovery from a third party responsible for a loss the carrier paid. After paying its insured, the carrier "stands in the insured's shoes" and seeks reimbursement.
See E&S Lines. Same concept, different name. Each state regulates surplus lines transactions through its own surplus lines law.
Excess liability coverage that sits above the limits of underlying policies (typically GL, auto, employer's liability). Often broader than the underlying coverage and may "drop down" to fill gaps.
The process of evaluating risk, determining whether to offer coverage, and pricing the offered coverage. Performed by a carrier (or MGA) on every new and renewal submission.
An endorsement under which the insured agrees their carrier will not pursue subrogation against a specified third party. Routinely required by clients of construction contractors and other vendors.
Statutory coverage providing medical care and wage replacement to employees injured in the course of employment. Required in nearly every state with limited exceptions for sole proprietors and small employers.
Coverage for risks of eXplosion, Collapse, and Underground property damage. Often excluded by default in construction GL policies; needs specific endorsement to add.