Commercial Insurance Glossary

You’ll find definitions of common real estate insurance terms by clicking on the topic below.

Actual Cash Value (ACV)
Actual Damages (also known as compensatory damages)
Additional Insured
Admitted Carrier
Aggregate Limit
A.M. Best Company, Inc.
BOP
Bodily Injury
Business Interruption Insurance
Certificate of Insurance
Claim
Claims-Made
Defendant
E&O
Effective Date
Endorsement
Exclusions
Expiration Date
Fraud
GCI
General Damages
Grace Period
Group Insurance
Indemnify
Indemnity
Independent Contractor
Insurance
Insurance Policy
Insured
Insurer
Insuring Agreement
Liability Insurance
Long-Tail Exposure
Named Insured
Negligence
Occurrence Basis
Personal Injury
Personally Liable
Plaintiff
Policy
Policyholder
Premium
Prior Acts Coverage
Professional Liability Insurance
Property Damage Insurance
Punitive Damages
Retention
Risk Management
Special Endorsement
Surety Bond
Term
Umbrella Liability Insurance
Underwriting
Workers’ Compensation

Actual Cash Value (ACV)

Replacement cost of damaged or lost property less depreciation.
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Actual Damages (also known as compensatory damages)

Sum of money a plaintiff (injured party) is entitled to, to compensate him for actual economic loss sustained.
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Additional Insured

Some person or entity, other than the original named insured, who is entitled to protection under an insurance policy either by virtue of the wording of the basic policy or because the policy has been modified to protect such interest.
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Admitted Carrier

An insurance company licensed by a particular state, monitored by the state for financial stability, covered by the state’s guaranty fund, and subject to the state’s regulations for licensed insurance companies.
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Aggregate Limit

Maximum amount that the insurer will pay under a liability policy during one annual policy period, regardless of the number of occurrences, usually in addition to legal defense costs. For general liability, policies are sometimes written with the aggregate limit applying separately to each scheduled location. Learn more
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A.M. Best Company, Inc.

An independent company that rates insurance companies on their financial stability and future claims-paying ability (see www.ambest.com).
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BOP

Business Owners Policy. A combination of property, liability and crime coverage.
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Bodily Injury

Refers to physical injury, sickness, or disease, or death, subject to any definitions or limitations in the policy.
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Business Interruption Insurance

Insurance coverage designed to protect the insured against loss of earnings resulting from the interruption of business caused by an insured peril, subject to the policy provisions.
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Certificate of Insurance

A document that indicates the types of insurance policies written, policy dates, and coverage limits.
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Claim

A demand or notice of a right or alleged right of any party to recover from an insurance company due to a loss covered by the policy.  Should you actually receive a written demand for money or services, you have an actual claim. (See what to do when you have a claim.)
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Claims-Made

Policies on a “claims made” basis require reporting of a potential claim during the policy term that the insured became aware of the potential claim, regardless of the date of the original transaction. In contrast, “occurrence” policies (see below) cover transactions that occurred during the policy term, regardless of the date when the claim is reported.
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Defendant

Individual or organization against whom a lawsuit has been brought.
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E&O

Errors and omissions.  Errors and Omissions Insurance is also called professional liability coverage.
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Effective Date

The date when the insurance policy goes into effect.
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Endorsement

A written provision that adds to, deletes, or modifies the provisions in the original insurance policy.
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Exclusions

The section of the policy contract that specifies the losses not covered by the policy.
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Expiration Date

The date when coverage ceases; exact dates and times vary by policy.
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Fraud

A false representation of a material fact (whether by words or conduct, by false or misleading allegations, or by concealment of that which should have been disclosed) which deceives and is intended to deceive another that causes legal injury.
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GCI

gross commission income; the amount of income, before any deductions, earned from commissions in a given year.
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General Damages

Money paid to a claimant for losses that cannot be specifically measured, such as pain and suffering.
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Grace Period

Prescribed period of time after the premium due date during which the coverage remains in force and the late premium may be paid.
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Group Insurance

An insurance plan by which a large number of persons are protected under one master policy.
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Indemnify

To restore an individual to the approximate financial position occupied before the loss.
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Indemnity

A type of contract, such as insurance, that serves to restore the individual to the approximate financial position occupied prior to the loss.
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Independent Contractor

One who agrees to perform services or supply commodities under a contract. In carrying out his/her contract, he/she is not under the control of, or an employee, of the party with whom he/she contracts.
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Insurance

Traditional risk-financing tool used to transfer the financial hazard of risk. An insurance policy spells out what is or is not covered caused by all or specific perils (causes of damage or injury). Insurance is also a contract whereby an organization agrees to indemnify another and/or to pay a specified amount for covered losses in exchange for a premium.
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Insurance Policy

A legally binding contract that defines the obligations of both the insured and the insurer.
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Insured

The person to be indemnified in case of loss or liability. In life insurance, the person whose life is covered by the policy.
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Insurer

The company guaranteeing to provide indemnity in case of loss or liability.
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Insuring Agreement

This section of the insurance policy sets forth the specific obligations assumed by the insurance company. Here is where the coverages of the policy are defined.
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Liability Insurance

Insurance protecting the insured against financial loss arising out of liability imposed by law.
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Long-Tail Exposure

Exposures for which a claim might be filed long after the insurance policy or policies expire.
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Named Insured

An individual, business or organization that is identified on the policy declarations page as the insured(s) under a policy. Most policies, especially liability policies, will have insureds or additional insureds other than the named insured (such as employees, volunteers, board members, landlords), but only the named insured is responsible for premium payments, receipt of notices, and adjustment of losses.
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Negligence

Failure to use the standard of care that a reasonably prudent person would exercise in a similar circumstance.
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Occurrence Basis

A liability coverage form that covers claims that occur during the policy period, and for which claims can be reported to the insurance company at any time during or after the policy period.  (See also “Claims Made” above.)
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Personal Injury

Distinguished from “bodily injury,” this term relates to injury arising from false arrest, libel, slander, wrongful eviction, etc.
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Personally Liable

Liability that an individual assumes when he/she is directly involved in the occurrence and cannot defer the liability to another person or entity.
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Plaintiff

Individual or organization that initiates a lawsuit to obtain a remedy for an injury.
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Policy

The written contract effecting insurance, or the certificate thereof, by whatever named called, and including all clauses, riders, endorsements, and papers attached thereto and made a part thereof.
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Policyholder

The person or entity in possession of an insurance policy.
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Premium

Payment by the insured to the insurance company in exchange for insurance coverage.
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Prior Acts Coverage

Coverage for all acts that occurred before the policy was issued. Prior acts coverage is one of the means of covering the gap in coverage when switching from a claims-made policy to another claims-made policy or to an occurrence policy. The prior acts coverage is provided by the new policy, as opposed to tail coverage that is added by endorsement to an expired claims-made policy.
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Professional Liability Insurance

Also known as malpractice coverage or errors and omissions (E&O) coverage; covers liability for damages arising from the rendering of or failure to render professional services.
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Property Damage Insurance

Insurance that covers direct damage to property and equipment including consequential losses (business income, loss of rents, extra expense) caused by an insured peril.
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Punitive Damages

Damages awarded by the court in excess of those required to compensate the plaintiff for the loss sustained. These damages are a type of punishment for the offender.
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Retention

A certain dollar amount beyond which insurance protection begins. The insured assumes the loss up to the retention (out-of-pocket claims expense limit) and the insurer pays the remainder, up to the policy limit. Learn more
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Risk Management

A discipline that counters downside risks by reducing the likelihood, magnitude, and unpredictability of loss.
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Special Endorsement

Written language appended to an insurance policy that changes the coverage in regards to special circumstances.
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Surety Bond

A document guaranteeing the faithful performance of a contract, or the faithful performance of a duty or trust.
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Tail Coverage

Tail coverage can be purchased for a period of time to cover claims that may happen after your insurance policy has expired.

Term

Generally, the period of time for which a policy or bond is issued.
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Umbrella Liability Insurance

Provides excess coverage over several primary policies, such as CGL, auto liability and employers liability. Increases the amount of liability insurance beyond that of the basic policies carried and covers areas of unknown exposures lacking in the basic insurance policy.
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Underwriting

The process of determining whether coverage will be offered, what policy provision will be included and at what price.
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Workers’ Compensation

Benefits (weekly payments for medical and hospital bills) which an employer is bound by law to provide for his/her employees who are injured on the job, regardless of fault.
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