Insurance Glossary

A

Actual Cash Value (ACV)

Replacement cost of property minus depreciation. The insurer pays what an item is worth today, not what it costs new. Compare Replacement Cost.

Additional Insured

A person or organization added to another party's policy so they are covered for liability arising from that party's work or products. Common in vendor and enterprise contracts.

Admitted Carrier

An insurer licensed by a state and backed by that state's guaranty fund. Contrast Non-Admitted Carrier.

Aggregate Limit

The most a policy will pay for all covered claims during the policy period, no matter how many claims occur.

AI Liability Insurance

Coverage for claims arising from artificial intelligence products and decisions, including model errors, hallucinations, algorithmic bias, and regulatory actions. See AI Liability.

Allocation

The split of a loss between covered and non-covered amounts, or between insured and uninsured parties, when a single claim involves both.

B

Bermuda Market

A specialty insurance and reinsurance hub used for large, complex, or hard-to-place risks, including management and professional liability.

Binder

A temporary agreement that puts coverage in force before the full policy is issued.

Broker of Record (BOR)

A letter appointing a broker as the client's exclusive agent for specified policies, authorizing them to service the account with carriers.

Business Email Compromise (BEC)

A fraud in which an attacker impersonates an executive or vendor to trick an employee into sending funds or data. Often addressed under Cyber or Crime coverage.

Business Interruption (BI)

Property coverage that replaces lost income and covers extra expense when a covered event halts operations.

C

Captive Insurance

An insurance company owned by the business it insures, used to finance risk directly. Structures include single-parent and group captives.

Certificate Holder

The party who receives a COI as evidence that the named insured carries coverage.

Certificate of Insurance (COI)

A one-page proof of coverage showing policies, limits, and dates, given to customers, landlords, or partners who require evidence of insurance.

Claims-Made Policy

A policy that responds only to claims first made and reported while the policy (or its extended reporting period) is active, regardless of when the act occurred. Compare Occurrence Policy.

Coinsurance

In property insurance, a clause requiring the insured to carry a stated percentage of a property's value or share in the loss. In health insurance, the insured's share of a covered cost after the deductible.

Commercial General Liability (CGL)

Coverage for third-party bodily injury, property damage, and personal and advertising injury arising from operations, premises, or products. See General Liability.

Consent to Settle

A provision requiring the insurer to obtain the insured's agreement before settling a claim, sometimes paired with a hammer clause.

Contingent Business Interruption (CBI)

Business interruption coverage triggered by a loss at a supplier, customer, or other third party the insured depends on.

Crime Insurance / Fidelity Bond

Coverage for financial loss from employee theft, fraud, forgery, and social engineering. See Crime / Fidelity.

Cyber Liability Insurance

Coverage for data breaches, ransomware, network failures, and the related regulatory and liability costs. See Cyber / Tech E&O.

D

Deductible

The amount the insured pays out of pocket on a covered loss before the insurer pays.

Defense Costs

The legal fees and expenses of defending a claim. Whether they erode the policy limit (inside the limits) or are paid separately (outside the limits) is set by the form. See duty to defend vs. indemnify.

Digital Asset Insurance

Coverage for crypto and digital-asset businesses, including theft, custody failure, and specialty crime. See Digital Assets & Crypto.

Directors and Officers (D&O) Liability

Coverage protecting directors, officers, and the company against claims alleging wrongful acts in managing the business. See D&O.

Duty to Defend

The insurer's obligation to fund a legal defense, generally broader than the duty to indemnify and often triggered by the allegations alone. See the full explainer.

Duty to Indemnify

The insurer's obligation to pay a covered judgment or settlement, generally narrower and resolved on the facts as they are ultimately established.

E

Employment Practices Liability (EPL)

Coverage for claims of wrongful termination, discrimination, harassment, and retaliation. See EPL.

Endorsement

An amendment that adds, removes, or changes coverage on a policy. Also called a rider.

Entity Coverage

The part of a D&O policy (Side C) that covers the company itself, not only its individuals.

Errors and Omissions (E&O)

Professional liability coverage for claims that a company's services, advice, or work caused a client financial harm. See Errors & Omissions.

Excess and Surplus Lines (E&S)

The non-admitted market that writes risks standard carriers decline, with more flexible terms and pricing.

Exclusion

Policy language that removes specific risks, losses, or circumstances from coverage.

Extended Reporting Period (ERP)

An add-on to a claims-made policy allowing claims to be reported for a set time after it ends. Also called tail or run-off coverage. See tail coverage explained.

F

Fiduciary Liability

Coverage for claims that those managing a company's benefit or retirement plans breached their duties under ERISA.

First Notice of Loss (FNOL)

The initial report of a claim or incident to the insurer, which starts the claims process.

First-Party Coverage

Coverage for the insured's own losses, such as damage to your property or your cyber recovery costs, as opposed to third-party liability.

G

General Aggregate

The overall cap a liability policy will pay for all covered claims in a policy period.

H

Hammer Clause

A provision that limits the insurer's obligation if the insured refuses a settlement the insurer recommends, sometimes softened by a coinsurance split rather than a hard cutoff.

Hard Market

A period of rising premiums, tighter terms, and selective underwriting. Contrast Soft Market.

I

Indemnity

Restoring the insured to the financial position they were in before a covered loss, without profit.

Insured

The person or organization protected by an insurance policy.

Insurer (Carrier)

The company that issues the policy and pays covered claims.

K

Key Person Insurance

Coverage that pays the company if a founder or critical employee dies or becomes unable to work.

L

Limit of Liability

The maximum amount an insurer will pay under a policy or a specific coverage part.

Lloyd's of London

A centuries-old specialty insurance marketplace of syndicates, used for complex and hard-to-place risks.

Loss Run

A report from a carrier listing an insured's past claims history, used in underwriting and quoting.

M

Managing General Agent (MGA)

A specialized intermediary with authority to underwrite and bind coverage on behalf of an insurer.

N

Named Insured

The primary party named on the policy, with the broadest rights and responsibilities under it.

Non-Admitted Carrier

An insurer not licensed in a given state, writing through the Excess and Surplus Lines market and not backed by state guaranty funds.

O

Occurrence Policy

A policy that covers events that happen during the policy period, whenever the claim is later made. Compare Claims-Made Policy.

P

Peril

The cause of a loss, such as fire, theft, or a cyberattack.

Policy Period

The dates during which coverage is in force.

Premium

The amount paid to the insurer for coverage.

Primary and Non-Contributory

Endorsement language making one party's policy pay first and without seeking contribution from another's, commonly required in contracts.

Prior Acts Coverage

Coverage under a claims-made policy for wrongful acts that occurred before the current policy began, back to a retroactive date.

Product Liability

Coverage for claims that a product a company made or sold caused injury or damage. See Product Liability.

Professional Liability

Coverage for claims arising from professional services or advice. See Errors and Omissions.

Property Insurance

Coverage for physical assets, buildings, equipment, and inventory against damage or loss. See Property.

R

Ransomware Coverage

Cyber coverage for extortion demands, incident response, and recovery after a ransomware attack.

Reinsurance

Insurance purchased by insurers to transfer part of their risk to other carriers.

Replacement Cost

The cost to repair or replace property with new material of like kind and quality, without deduction for depreciation. Compare Actual Cash Value.

Representations and Warranties (R&W) Insurance

Coverage in M&A deals protecting against losses from breaches of the seller's representations in the purchase agreement.

Reservation of Rights

A notice that the insurer will defend a claim while preserving its right to contest coverage later.

Retention (Self-Insured Retention)

The amount of loss the insured absorbs before coverage responds, similar to a deductible but structured differently.

Retroactive Date

The date on a claims-made policy before which wrongful acts are not covered.

Run-off

Another term for an extended reporting period bought when a company winds down or is sold. See tail coverage.

S

Severability

A provision treating each insured separately, so one insured's conduct or misstatement does not void coverage for the others.

Side A / B / C (D&O)

The three insuring agreements of a D&O policy. Side A protects individuals when the company cannot indemnify them, Side B reimburses the company for indemnifying them, and Side C covers the entity itself. See D&O.

Social Engineering Fraud

Loss from being deceived into transferring funds or data, often covered as an endorsement to Crime or Cyber.

Soft Market

A period of falling premiums and broader terms as insurers compete for business. Contrast Hard Market.

Sublimit

A cap within a policy that applies to a specific coverage and is lower than the overall limit.

Subrogation

The insurer's right, after paying a claim, to pursue the party that caused the loss and recover its payment.

Surety Bond

A three-party guarantee that one party will meet an obligation to another, used for contracts, licenses, and regulatory requirements.

T

Tail Coverage

Coverage that keeps a claims-made policy responding to claims filed after it ends. See tail coverage explained and Extended Reporting Period.

Technology E&O (Tech E&O)

Professional liability for technology and software companies, covering failures of their product or service. See Cyber / Tech E&O.

Third-Party Coverage

Coverage for claims made against the insured by others, as opposed to the insured's own first-party losses.

U

Umbrella Insurance

Coverage that adds limits on top of underlying liability policies once those are exhausted.

Underwriting

The process by which an insurer evaluates a risk and decides whether, and on what terms, to cover it.

W

Waiver of Subrogation

A provision, often required by contract, in which the insured and insurer give up the right to recover from a specified party after a loss.

Wholesale Broker

A broker who accesses specialty and E&S markets on behalf of retail brokers and their clients.

Workers' Compensation

State-mandated coverage that pays medical costs and lost wages when an employee is injured on the job.

Wrongful Act

The error, misstatement, omission, or breach of duty that triggers a management or professional liability claim.