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If you're like most people, discussing insurance makes your eyes glaze over. And now we're about to mix insurance with the dictionary? We get it, but hear us out.
When it comes to safeguarding your business, knowledge is power. To select the right products for your risk management strategy — a risk management strategy that includes (or should include) insurance to limit your financial exposure — you need to know right side up from upside down.
Knowing which side up starts with basic knowledge of key insurance terms that will come up over-and-over again as you select your insurance coverage. Then, when, not if, disaster strikes, you can make use of that coverage.
In this article, we’ll walk you through key business insurance terms you need to know, as well as definitions for the most common types of insurance that you’ll routinely hear about.
Common Business Insurance Terms
The insurance industry—like all industries—uses a set of terminology to describe its products and how people and companies use or interact with those products. To fully understand conversations about insurance, you should know the following terms:
- Deductible – A deductible is the amount you have to pay out of pocket before your insurance kicks in to cover the claim (you’re likely most familiar with the term from discussing your individual health insurance). For most insurance coverage, the higher the cost of the deductible, the lower your premium will be.
- Premium- Your premium is the amount you pay monthly or annually for your insurance policy. The cost of your premium will vary based on the type of insurance, breadth of insurance, and other risk factors specific to your industry and company’s circumstances.
- Claim – A claim is a formal request to an insurance company for compensation for a covered incident.
- Endorsement – Also known as a rider, an endorsement is an attachment to a policy that modifies the policy’s terms and conditions.
- Certificate of Insurance – This is proof of your insurance policy, which shows the limits and deductibles, the effective dates of the plan, and your insurance company provider.
- Quote – A quote is an estimate of the cost of a premium.
- Primary Policy – When you have multiple insurance policies, your Primary Policy is the first policy to kick in to respond to a claim.
Common Types of Business Insurance
You may have heard about some of these before, but here’s a quick-and-dirty overview of the most common types of business insurance that anyone in business should be aware of:
- General Liability Insurance – General Liability Insurances forms the core of your business’s insurance policy, and protects businesses against most lawsuits for bodily injury or property damage.
- Errors and Omissions Insurance – Also called Professional Liability Insurance, Errors and Omissions Insurance covers you if a client believes your professional service was conducted incorrectly. This type of insurance will cover all of your legal fees if anyone threatens to, or does, file a lawsuit based on your professional services.
- Commercial Property Insurance – This insurance is just what it sounds like; it covers commercial property assets, such as damage to buildings and contents, and is a necessity whether you own or lease your business space. Coverage includes any damage or loss to signage, equipment, furniture, and inventory.
- Home-Based Business Insurance – If you’re running your business out of your home, home-based business insurance will protect your equipment or inventory.
- Worker’s Compensation Insurance – Required by law, Workers’ Compensation Insurance will cover an employee’s medical treatment if an employee is injured or dies because of a work-related accident. What’s more, this insurance covers businesses in the event the injured worker brings a lawsuit.
- Automobile Insurance – This is insurance to cover company vehicles, and it includes coverage to protect the business against liability if the company vehicle is involved in a collision.
- Commercial Umbrella Insurance – Commercial Umbrella Insurance offers additional coverage beyond the basic policy to meet a company’s specific needs. It provides an added layer of coverage for business assets to protect an owner from having to pay if a claim arose.
- Business Interruption Insurance – This insurance covers lost earnings after a disaster or other uncontrollable event.
- Business Owner’s Policy – Also known as a BOP, a Business Owner’s Policy groups together several types of business insurance such as general liability insurance, property insurance, and business interruption insurance.
Protect Your Business
Understanding the basics of business insurance jargon is a critical step in making sure you have the knowledge base to seek out the right coverage to protect your business and employees. You’ve worked hard to grow your company, and we’re here to help ensure you have everything you need to safeguard your company’s future.
Contact one of our knowledgeable agents today to learn more.