Common Insurance Terms to Know
Overview
Agents often run into industry terms that can feel like alphabet soup — especially when quoting E&S business. This guide breaks down the most common policy, coverage, and claims terminology you’ll see while working in Excess & Surplus.
Basic Policy Terms
Named Insured: The person or business listed on the policy. They own the policy and receive the primary coverage.
Additional Insured: A third party added to the policy for limited coverage — usually liability only, typically required by a contract or lease.
Endorsement: A change or add-on to a policy that updates coverage, limits, or insured information.
Binder: A temporary proof of insurance issued before the full policy documents are available.
Declarations Page (Dec Page): The first page of the policy. It shows key details like:
Who’s insured
Coverage limits
Premium
Policy term
Locations
Effective Date: The date when coverage officially begins.
Expiration Date: The date when coverage officially ends.
Cancellation: Ending a policy before its expiration date.
Reinstatement: Restoring a canceled policy (often after the insured pays overdue premium).
Premium & Payments
Premium: The cost of the policy or the amount of money a business pays to an insurance company in exchange for coverage and protection against specific risks over a certain period.
Initial Premium/Down Payment: This payment activates coverage at the start of the policy term. In commercial insurance, businesses can either pay the full premium upfront or use premium financing, making a partial down payment and paying the remainder in installments.
Audit: A review (common for contractor GL policies) where the carrier verifies actual payroll or sales and adjusts the premium up or down.
Minimum Earned Premium (MEP): The minimum amount the carrier keeps, even if the policy cancels early.
Example: If a policy has 25% MEP, the carrier keeps 25% of the annual premium no matter what.
Finance Company: A third party that pays the premium upfront to the carrier. The insured then repays the finance company in installments.
Coverage Types
General Liability (GL): Covers bodily injury or property damage caused to others during business operations.
Property Coverage: Covers damage to the insured’s own building, equipment, or inventory.
Inland Marine: Covers tools, equipment, or materials that move from job to job.
Hired and Non-Owned Auto Liability (HNOA): Covers liability if employees use rented, leased, or personal vehicles for business. It does not cover physical damage to the vehicle itself.
Excess Liability: Adds additional limits on top of another liability policy (GL, Auto, or Employers’ Liability). It does not broaden coverage; it increases the dollar amount available.
Cyber Liability: Covers losses due to data breaches, hacking, ransomware, or other cyber incidents. May include:
Customer notification
Data restoration
Legal defense
Claims & Losses
Claim: A formal request made by a policyholder to their insurance company, asking for payment or coverage after experiencing a covered loss or incident
Deductible: The amount of money a business must pay out of pocket toward a covered claim before the insurer pays the remainder of the loss, up to the limits of the commercial policy.
Loss Run: A report provided by an insurance carrier that details the history of claims made against a business insurance policy over a specific time period, typically three to five years
No Loss Statement / No Known Loss Letter: A signed statement confirming no claims or incidents occurred during a given period. Often required for reinstatements or when binding coverage after a lapse.
Other Common Terms
Certificate of Insurance (COI / ACORD 25): A document proving insurance coverage, often required by landlords or project owners.
Additional Interest: A party that receives notice of policy changes or cancellations but does not receive coverage.
Named Location: The specific address or premises listed on the policy where coverage applies.
Risk: Refers to the potential for loss, damage, or financial harm that a business faces from various hazards such as accidents, natural disasters, liability claims, or operational disruptions.
Exposure (Rating Basis): The unit of measurement to which insurance rates are applied to determine the premium for a risk. It quantifies the risk an insured entity presents and is correlated with potential loss. The units used to calculate the premium are payroll, gross sales, square footage, and number of vehicles.
Underwriter: The person who evaluates the submission and decides terms, pricing, or eligibility.
Broker: The intermediary (Pathpoint) connecting agents and insureds with carriers.
LPR (Loss Policy Release / ACORD 35): The form confirming that the insured agrees to cancel a policy. It releases the carrier from future liability once the policy is terminated.
Related Articles
What are the different Cause of Loss/Coverage forms?