Ten Business Insurance Terms You Should Know
Wednesday, 14 October 2020
At BIG, our goal is to make insurance terminology understandable for clients so they can be confident in the coverage they have. When you purchase a business insurance policy, you may come across all sorts of industry jargon and insurance terminology that may not be so self-explanatory when you read it, which can become confusing or overwhelming. It’s time to make things clear and explain these terms so that you can better understand what they mean for you and your business. In this blog, we will explain what is a BOP (Business Owners Policy) as well as other insurance terminology including: What is a Certificate of Insurance? What is liability? What is a rider in insurance? What is a peril?
Business Insurance Terminology: What is a BOP?
As you are researching and shopping for business insurance, a Business Owner’s Policy (BOP) might be the best option for your business. A BOP is a combination of many types of commercial insurance that covers multiple areas of risk and they are often offered at a discounted rate when bundled together. They may include a package of these types of insurance coverage: Commercial Liability, Professional Liability, Commercial Property Insurance, Cyber Insurance, etc. Buying a BOP can help ensure your business has the right coverage for all potential risks and can save you money in the process. To find out if a Business Owners Policy might be the best solution for your insurance needs, contact one of our commercial brokers!
Let’s take a look at some other business insurance terminology that will help you better understand your business insurance policy.
What is Liability in Insurance?
Another term commonly used in insurance terminology is liability. What is liability in insurance, exactly? When you are liable for something it means that you are held responsible by the law. So, what is liability in insurance? In the insurance world, liability refers to the coverage that protects an individual or business if someone files a lawsuit against them and found responsible by law for a claim event. Some examples include an injury, malpractice, or property damage. As the insured, if you are found legally liable, your liability insurance coverage would cover legal costs and/or payouts as a result of a lawsuit. There may be limits or restrictions in your policy, so be sure to consult with your broker to know what your policy covers.
What is a Certificate of Insurance (COI)?
If you are getting a new office space, signing a new contract, or getting a loan for your business, you may be asked for a Certificate of Insurance (COI), which is really just a fancy term for showing proof that you have business insurance. When you receive your insurance documents from your provider, they will give you a one-page summary of your coverage and important details of your policy.
What is a Rider in Insurance?
You may have heard of a ‘rider’ as business insurance terminology, so what is a rider in insurance? A rider can also be called an endorsement. It’s an adjustment to your policy that adds benefits or restrictions, allowing you to make changes without having to purchase a whole new policy. An insurance rider can be used to add specific coverage such as modifying business interruption insurance, adding a communicable disease rider, and much more!
What is a Peril in Insurance?
As we continue to talk about business insurance terminology, you may have seen a term “peril” and wondered, “what is a peril in insurance?” A peril is a specific cause of loss or risk that your insurer agrees to cover. Some examples of perils are fire, vandalism, or theft. Depending on the wording of your policy, you may have an all-risk policy, which covers all perils except expressly excluded perils. If you have a named-peril policy, your insurer will cover only the perils listed in your policy.
Other Business Insurance Terminology:
Binder: This is a document that acts as a temporary insurance policy before the policy is fully issued and are issued for thirty days. Don’t worry, you still have full coverage, unless your broker tells you otherwise.
Deductible: A pre-determined amount of money that you agree to pay in the event of an insurance claim. After you pay your deductible for a covered claim, your insurance covers the remaining amount as per your policy limits. Read more about deductibles here.
Exclusion: A condition or risk stated in your policy that your insurer will not cover. Exclusions are very specific to your unique policy.
Per Occurrence vs. Aggregate: ‘Per occurrence’ is the total amount your insurer will pay for one incident or claim. Aggregate limit refers to the total amount they will pay for multiple claims over a year on one policy.
Premium: The amount of money you pay your insurance company for coverage.
After discussing some business insurance terminology, we hope that this blog will help you have a greater understanding of insurance and know what questions to ask of your insurance provider. As a business owner, we know you want to make an informed decision with regards to your business insurance policy, and part of your responsibility is to read through your documents. If you ever have any questions about your business coverage or want to better understand other insurance terminology, our BIG brokers are ready to answer any of your questions. After looking over your policy, if you feel that you need to make changes to your coverage as your business has grown or changed, contact a BIG commercial broker to get started!