Insurance terms, in plain English

Published 2026-06-12 · by Brokly

• Additional insured

  Someone else — often a client, landlord, or general contractor — added to your liability policy so they’re also protected if a claim from your work names them.

• Aggregate limit

  The most a liability policy pays in total across the whole policy term, no matter how many separate claims there are.

• Business interruption coverage

  Pays the income your business loses when a covered event — like a fire — forces you to close, so the bills keep getting paid while you rebuild.

• Business owner's policy (BOP)

  One policy that packages general liability with commercial property coverage — a bundle many small businesses buy.

• Certificate holder

  The person or company a certificate of insurance is issued to — they get the paper (and often cancellation notices), but no coverage from your policy.

• Certificate of insurance (COI)

  The one-page proof of coverage someone asks you for — what's on it, what “additional insured” means, and how to get one fast.

• Class code (workers' comp)

  A standardized code that groups businesses by the kind of work they do — your workers' comp rate is set per class code, not per business.

• Commercial auto insurance

  Covers vehicles used for business — personal auto policies often don't cover delivery and other commercial use, which is why this coverage exists.

• Commercial property insurance

  Covers the physical things your business owns — the building if you own it, and what's inside: equipment, furniture, inventory.

• Contractor license bond

  A surety bond a state or local licensing board requires before it issues a contractor license — a guarantee to the board that you'll follow its rules.

• Cyber liability insurance

  Covers the fallout from a hack or data breach — notifying customers, restoring data and systems, and the claims that follow.

• Declarations page

  The front page of an insurance policy — who's covered, for what, with what limits, for which dates, at what premium.

• Deductible

  The amount of a covered loss you pay out of your own pocket before the policy pays the rest.

• Dram shop law

  A state law that can hold a bar or restaurant responsible when it serves a visibly intoxicated person who then injures someone.

• Employer's liability insurance

  The part of a workers' comp policy that covers lawsuits employees can still bring — claims that fall outside the state's no-fault benefit system.

• Endorsement

  A written change to a policy — coverage added, a person added, or a term changed — without buying a new policy.

• Exclusion

  What a policy says it will NOT pay for — every policy has a list, and it matters as much as what's covered.

• Experience modification rate (e-mod)

  A multiplier on your workers' comp premium that compares your claims history to businesses like yours — better-than-average history discounts the premium; worse raises it.

• Garagekeepers coverage

  Covers customers' vehicles while they're in your care — parked on your lot, up on the lift, or out on a test drive.

• General liability insurance

  Covers injuries to other people and damage to their property caused by your business — the coverage most certificate requests are about.

• Hired & non-owned auto coverage (HNOA)

  Covers your business's liability when employees drive rented or personal vehicles for work — vehicles the business uses but doesn't own.

• Liquor liability insurance

  Covers claims that arise from serving alcohol — the coverage that responds when a guest you served goes on to hurt someone.

• Monopolistic state fund

  In a handful of states, workers' comp must be bought from the state itself — there is no private market to shop.

• Motor truck cargo insurance

  Covers the freight you're hauling — if the load is damaged, stolen, or lost on the road, this is the coverage that pays the owner of the goods.

• Named insured

  The person or business the policy actually belongs to — listed by name on the policy, with all the rights and protection the policy provides.

• Occupational accident insurance

  Accident benefits for injuries on the job — medical bills, disability, death benefits — for independent contractors who aren't covered by workers' comp.

• Payroll basis

  How workers' comp premium scales: a rate per hundred dollars of payroll — more payroll, more premium, automatically.

• Per-occurrence limit

  The most a liability policy pays for any single claim or incident; its partner, the aggregate limit, caps the whole policy year.

• Physical damage coverage (trucking)

  Repairs or replaces your own truck after a crash, fire, theft, or storm — the trucking version of collision and comprehensive.

• Premium

  The price of the policy — what you pay the insurer, usually yearly or monthly, for the coverage.

• Primary & non-contributory

  Your policy pays first — and in full — for a covered claim; the other party’s insurance doesn’t have to chip in (it doesn’t “contribute”).

• Professional liability insurance (E&O)

  Covers a professional mistake — advice, a design, a spec, or a service that fails and costs your client money. General liability doesn't cover that.

• Statutory limits

  Coverage that pays whatever the state's law requires — workers' comp benefits aren't capped at a dollar figure you pick; the statute sets them.

• Surety bond

  A three-way guarantee: a surety company promises your customer or the state that you'll meet an obligation — and if you don't, the surety pays them and then collects from you.

• Tools & equipment coverage (inland marine)

  Covers your work gear — tools, diagnostic equipment, machines — in the shop, in the truck, or on the job.

• Umbrella / excess liability

  Extra liability limits that sit on top of your general-liability and auto policies once their own limits are used up.

• Waiver of subrogation

  Your insurer gives up its right to chase the other party for repayment after it pays a claim — so it can’t later bill the client for what it paid out.

• Workers' compensation insurance

  Covers medical costs and lost wages if an employee is hurt on the job; a certificate confirms you carry it (required in nearly every state).

Compare two coverages

When two coverages sound alike, these explain the difference and which one fits.

• General liability vs. BOP

  A BOP (business owner's policy) bundles general liability with property coverage — you usually don't pick between them.

• General liability vs. professional liability

  General liability covers people and property you harm; professional liability covers advice or work that costs a client money.

• Bonded vs. insured

  A bond protects your customer from you; insurance protects you. They're different things.

• Claims-made vs. occurrence

  Which date matters: when the claim is filed against you, or when the incident happened.

• Commercial auto vs. personal auto

  Personal auto policies often won't pay claims from business use — deliveries, hauling tools, driving between job sites.

• Workers' comp vs. employer's liability

  Two parts of one policy: workers' comp pays an injured employee's medical bills and lost wages no matter whose fault it was; employer's liability defends you if the employee sues anyway.

Definitions describe how policies are typically structured — exact terms live in the policy. Not legal or compliance advice.