Important terms to understand in your business insurance policy

Important terms to understand in your business insurance policy

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Buying business insurance can be as simple as contacting an insurance broker, obtaining quotes, and signing on the dotted line. But when it comes to understanding business insurance policy and what it covers, it can be much more difficult. We want to simplify and speed up the process of getting business insurance. We aim to gain a better understanding of what you’re buying so that you can be confident that you’re getting the protection you need.

Following are the important terms used in a business insurance policy:

Actual Cash Value (ACV)
Actual Cash Value is the depreciated replacement cost of damaged or stolen property. It is a process of valuing insured property while considering the age and condition of the property and its items. Actual Cash Value is not equal to the replacement cost value of a property. It is an assumption of how much something is worth over its expected lifetime.
Additional Insured
Any individual or organization that you add to your commercial policy is considered an additional insured. By introducing an additional insured to your policy, you are enhancing your coverage to them. For example, if you’re a contractor, you may be asked to extend your liability coverage to the that is hiring you for a particular project.
Aggregate Limit
The aggregate limit is the maximum amount of money an insurance company will give for your covered losses during a policy’s one-year period.
Binder
A binder is an official document that serves as a temporary insurance policy until the full policy can be issued. As a company’s owner who has been issued a binder, you are fully insured unless mentioned otherwise by your broker. Binders are issued for 30 days and dismissed once the full policy is issued.
Business Owner’s Policy (BOP)
A Business owner’s policy is a policy package that includes many types of insurance policies at a discounted rate. A BOP usually includes commercial general liability (CGL) and commercial property coverage, but it may also cover many other foundational business policies, like a professional liability. A BOP is a good policy for small businesses to consider as it provides a variety of coverages at a bundled price.
Certificate of Insurance (COI)
A Certificate of Insurance (COI) is a one-page document issued by a broker summarizing the details of your insurance policy. It confirms you are actively insured. You will often be asked for this when you are getting space for an office, signing a new contract, or getting a loan.
Deductible
A deductible is an amount, as the insured, pays in an insurance claim before insurance coverage kicks in after filing a claim. After you’ve paid the deductible, your insurance company will pay you for the remainder of the claim value (up to the policy’s limit). You can select the deductible amount of money in your policy, and the higher it is, the lower your annual premium will be.
Grace Period
If you pay your annual insurance premium monthly but miss a payment, the grace period is an amount of time your insurer will give you to pay your bill before it revokes your coverage for failing to pay.
Liability
To be liable is to be held responsible by the norms of the insurance policy. Liability refers to insurance coverage that protects an individual or business in the event they are sued and found responsible by norms, such as malpractice, an injury, or property damage. If you are found legally liable, a liability policy will cover your payouts and legal costs. contractual liabilities and Intentional damage are usually not included. Talk to a licensed broker to understand the limitations and restrictions of your policy.
Loss
A loss refers to damages to insured property or items. For example, if a windstorm damaged the roof of your commercial property, that is considered a loss. Therefore, you may be able to file a claim with your insurance provider to recoup the cost of those damages, minus a deductible.
Named Insured
A named insured is a person or company that owns an active insurance policy and to whom the policy will provide its coverage.
Policyholder
The policyholder is a company or individual that owns an insurance policy. So, as a business owner, if you are the policyholder, you are also named insured. That means you own the policy, pay for the policy, choose the coverages, and can make modifications.
Premium
A premium is a money you pay to the insurance company annually for insurance coverage. The premium paid by you may include a commission paid to a broker, and separate fees to cover the expenses incurred to write and manage the insurance policy.
Rider
Also referred to as an insurance endorsement, a rider is an adjustment to the terms and conditions of an Insurance policy, such as additional restrictions or benefits.
Risk Management
Risk management is planning to identify and prevent damages.