Following are definitions of several terms commonly used to describe
different aspects of business insurance coverage:
Actual Cash Value (ACV) – Coverage for the dollar amount
needed to repair or replace damaged property minus depreciation.
Blanket Insurance – Coverage for more than one type
of property at a single location or similar types of properties at multiple
locations.
Business Income (also called “Business Interruption”)
Insurance – Coverage for lost net income and continuing
expenses for a specified period of time, as a result of a cessation
in normal business activities due to a covered loss.
Business Owner’s Policy (BOP) – A package policy
that combines property, general liability, business income and other
types of coverages into a single policy.
Coinsurance (for property insurance) – A clause in
the property policy requiring the policyholder to carry an amount of
insurance equal to a specified percentage of the value of the property.
Compliance will result in full payment on a covered loss minus the deductible.
Failure to comply will result in a penalty for underinsurance.
Deductible – A dollar amount, usually a predetermined
figure (i.e., $1,000) or a percentage (i.e., 2% of the value of the property)
for which the policyholder must pay before the insurance company will
pay for a covered loss.
Endorsement – A provision attached to an insurance
policy that amends the policy’s original terms.
Exclusion – A provision in a policy that eliminates
coverage for certain losses, people, locations or conditions.
Liability Insurance – Coverage for covered claims of
bodily injury or property damage for which the policyholder is legally
liable.
Medical Payments – The specified amount for which the
insurance company agrees to reimburse the policyholder for the medical
expenses for bodily injury of a third-party. Medical expenses usually
are paid regardless of fault.
Named-Peril Policy – An insurance policy that only
covers losses resulting from perils specifically named in the policy.
Peril – An event or condition that causes a loss (e.g.,
fire, windstorm, theft, etc.).
Professional Liability Insurance – Coverage for professionals
as determined by their respective industry's expected standard of care
for claims of negligence, errors or omissions causing damages to a client.
Replacement Cost – Coverage for the dollar amount needed
to repair or replace damaged property without deducting for depreciation.
Special (or “Open”) Peril policy – An
insurance policy that covers losses resulting from any peril not specifically
excluded in the policy.
Umbrella – Coverage for losses above the limit of the
underlying policy. Umbrella policies may also broaden coverage for losses
not normally covered in the underlying policy.
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