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Glossary of Business Insurance Terms

Actual Cash Value – Method of computation used to assess and valuate damages owed on insured property. This value is typically defined by subtracting the depreciation value from the replacement cost of the item in question. However, calculation can vary by state.

Additional Insureds Coverage – The inclusion of another party, such as a private contractor or event host, to your insurance policy’s coverage.

For an additional premium, we can add on certain types of additional insureds to your policy. This includes: controlling interest, co-owner of insured premises (if not married), manager or lessor of premises, lessor of leased equipment, owner of leased land, grantor of franchise, grantor of license, state/political subdivision, dispatch or referral service. The most common type is manager or lessor of premises, which is helpful to insureds that sell temporarily at shows and are required by the promoter or venue of the show to add them on as additional insured. These are $20 each.

Annuity – A fixed payment amount of money paid annually.

Articles of Operation (or Operating Agreement) – Document used to officially and lawfully establish an LLC. LLCs must establish themselves with the Secretary of State or equivalent state body to be recognized, and provisions such as controlling interest, profit distribution, and the declaration of partners must be present within the document. Specifics will vary by state.

At-fault – The party responsible for the claim in question. The entity found at-fault is typically responsible for settlement of the claim.

Business Liability – General liability coverage should there be an accidental third party bodily injury or damage to property on the premises. Limited product liability coverage is included as well in certain circumstances. This overall liability limit is extended to temporary locations such as trade shows, festivals, etc. $300,000 is the per occurrence limit that comes with the policy, but there are also options of $500,000 and $1,000,000 per occurrence. The aggregate amount is double the per occurrence limit.

Business Liability and Business Personal Property – The basic coverages that all Home Business Insurance policies come with when offered through Lindbergh. The base premium includes $300,000 of business liability and $5,000 for business personal property. Most competitor policies include one or the other; however, to our knowledge, no one offers both at premiums starting at $150.

Business Personal Property – This coverage insures your business equipment, inventory, displays, etc. We automatically include $5,000 for BPP, but we have available limits up to $100,000. The standard deductible is $250. The BPP coverage will only pay up to the limits selected and aggregate BPP of greater than $100,000 is ineligible for coverage. In certain circumstances, we may also pay for the loss of your business income resulting from damage to your BPP.

Casualty Insurance – An insurance category (also known as liability insurance) that provides protection from property loss, damages of most kinds, or other material losses.

Claim – Primary petition made by insured (or their beneficiary) for payment.

Controlling Interest – The measurable extent of one entity’s influence on major decisions regarding a corporation, LLC, or other business unit. As an example, if you have a five-person LLC, and two founders hold a 33% controlling interest, the other three associated people are assumed to each hold 11% controlling interest.

Corporation – A type of business model owned by shareholders, where the company or group of people is legally authorized to act as a single entity and is accountable for debts and actions taken by the company.

Coverage Limits – Maximum amount an insurance company will distribute for approved (“covered”) losses. Those losses can be assessed per person, per claim, or using a term-limited aggregate amount.

Deductible – An amount deducted from a given loss before insurance coverage begins, which is paid out of pocket.

Electronic Data Processing Equipment Coverage – This is an optional coverage for computers, printers, software, and some other electronics if related to the business. This coverage is broad, covering many different types of computer losses, and there is no deductible associated with this coverage. This coverage is available (up to $10,000 in coverage) in all states, except in CA and FL, where it is offered at an additional premium.

Endorsement – Document that essentially ‘edits’ an existing policy, either adding or subtracting coverage.

Exclusion – Specified instances and provisions that the insurer will not cover, typically defined in the finalized policy agreement. (See also: Specified Perils)

Garagekeepers Coverage – We offer this coverage for an additional premium. When approved, garagekeepers coverage is available for insureds who temporarily take possession of customers’ autos in the normal conduct of their business. It provides comprehensive and collision causes of loss at $30,000 and $60,000 limits on the following basis: legal liability, direct coverage – excess or direct coverage – primary. The garagekeepers coverage does not provide auto liability coverage for operation of a vehicle.

Identity Fraud Expense Coverage – Available for an additional premium, we offer this optional coverage to generally restore the insured’s reputation as a result of identity fraud. This provides a $25,000 aggregate limit for identity fraud expense coverage and a $5,000 aggregate limit of coverage for additional advertising expenses incurred by the named insured.

Indemnity – Compensation to the victim of a loss, restored via payment, repair, or replacement.

Insured – The person or entity covered by a coverage policy drawn out by insurance company. This term is typically used in lieu of your business’s name in a standard written policy.

Insurer – The insurance entity chosen to cover the insured within defined parameters; this is the insurance company you choose to do business with.

In Transit – The route between a business owner’s main residence and their client’s destination (this can be another client’s home, or a neutral ground that you have the right to do business on.)

Limited Liability Company (LLC) – A type of privately owned business model designed to allow one or more individuals to conduct operations as an entirely separate entity. LLCs offer both limited liability and the benefits of pass-through taxation.

Liability – Commonly understood as a legal obligation of responsibility. Generally, this refers to the legal responsibility of owing compensation for damages and other assessed costs associated with an insurance claim.

Money and Securities Coverage – Available for an additional premium, this optional coverage that we offer insures business-related money, checks, or the like if they are stolen or destroyed, either at your home or while temporarily off-premises.

Open Perils – This includes all types of understood, unnamed risks covered by an insurance policy. These claims are not explicitly specified as covered; rather, they are implied scenarios that differ from specified (named) perils that are excluded from coverage on a policy.

Payor – The associated party bound to provide compensation to a specified payee. This can be the insurance company or the insured, if they are found at-fault for a claim.

Payee – The associated party owed compensation due to a claim.

Public Adjuster – A licensed claims adjuster, who assesses damages and condition of property on behalf of a policyholder. Public adjusters will draw up an estimate of total losses and provide this to the insurer to negotiate payment of losses.

Quotation – Commonly referred to as a quote, this is the estimated amount of insurance available for an entity based on varying factors. These include credit ratings, as well as risk levels associated with certain behaviors, conditions, and stipulations relating to specific industries or scenarios.

Schedule rating – A type of insurance merit rating used to define quotes for specific risk classes. In terms of home business insurance, these factors include the nature of your business and the risk associated with those who operate within your industry. For example, a billing service might have a lower schedule rating than a glassmaker, due to hazards like increased risk of bodily harm.

Sole Proprietorship – A type of business model run by a single individual in which there is no legal differentiator between the company and its owner.
Specified perils – Also known as ‘named perils’, these are claims that are explicitly named in a policy as being covered or not covered.

Terrorism Coverage – We offer this coverage at additional premium to insure your business against losses in the event of a certified terrorist act (as defined by TRIA) in your area. In most areas, this coverage is $1/year, but in some, it costs up to 20% of the total premium. Customers do have the option to reject the coverage in all states except Florida.

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The coverage is perfect for a direct sales company. The cost is reasonable. The service is great.

Stan Lewis