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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