Quick answer
This glossary explains the insurance terms small-business owners see most often, from additional insured and aggregate limit to waiver of subrogation. Each definition is written in plain English, answers the question first, and links the term to how it affects your coverage, your contracts and what you pay.
- Additional insured
- An additional insured is a person or company added to your liability policy so they're protected if they're sued over your work. Clients, landlords, venues and general contractors often require it. It's added by endorsement and usually shown on your certificate of insurance. It doesn't give them coverage for their own separate activities.
- Aggregate limit
- The aggregate limit is the most your insurer will pay for all covered claims during one policy period, usually one year. For example, a general liability policy with a $2 million aggregate pays no more than $2 million in total that year, even if each single claim stays under the per-occurrence limit.
- Business interruption insurance
- Business interruption insurance replaces lost income and helps pay ongoing expenses when your business must close temporarily because of covered property damage, such as a fire. It's often included in a business owner's policy (BOP) or added to commercial property coverage, and it usually requires a waiting period before payments start.
- Business owner's policy (BOP)
- A business owner's policy bundles general liability and commercial property coverage, often with business interruption, into one package for small businesses. It's usually cheaper than buying the coverages separately. According to Insureon's 2026 data, the median BOP costs $83 a month. Not every business qualifies, especially higher-risk operations.
- Certificate of insurance (COI)
- A certificate of insurance is a one-page document that proves you have coverage. It lists your insurer, policy numbers, coverage types, limits and dates. Clients, landlords and venues ask for it before you start work. A COI only summarizes coverage; the policy itself controls what's actually covered.
- Claims-made policy
- A claims-made policy covers claims that are first made against you while the policy is active, as long as the incident happened after the policy's retroactive date. Professional liability is often written this way. If you cancel, you may need tail coverage to stay protected against claims filed later.
- Commercial auto insurance
- Commercial auto insurance covers vehicles owned or leased by your business, including liability for accidents and, if chosen, damage to the vehicles. Personal auto policies often exclude business use, so a vehicle used mainly for work usually needs a commercial policy. Costs vary widely by vehicles, drivers and how they're used.
- Commercial general liability (CGL)
- Commercial general liability, or general liability, covers claims that your business caused bodily injury or property damage to someone else, plus advertising and personal injury such as libel. It doesn't cover your own injuries, your property, employee injuries or professional mistakes. Insureon's 2026 median cost is $45 a month.
- Commercial property insurance
- Commercial property insurance covers the buildings, equipment, inventory and furniture your business owns or is responsible for, against risks such as fire, theft and certain weather damage. Flood and earthquake are usually excluded. Insureon's 2026 data shows a median of $108 a month for commercial property coverage.
- Commercial umbrella insurance
- Commercial umbrella insurance adds extra liability limits on top of your general liability, commercial auto and employer's liability policies. It pays after those policies reach their limits. It's useful when a contract requires higher limits or a serious claim could exceed your base coverage. Insureon's 2026 median is $86 a month.
- Completed operations
- Completed operations coverage protects you from claims for injury or damage that happen after your work is finished, such as a shelf you installed falling weeks later. It's typically part of general liability for contractors and installers. Policies have a separate products-completed operations aggregate limit.
- Cyber liability insurance
- Cyber liability insurance helps pay costs after a data breach or cyberattack, such as notifying customers, restoring data, legal fees and claims from people whose information was exposed. Businesses that store customer or payment data are most exposed. Insureon's 2026 data shows a median cost of $129 a month.
- Deductible
- A deductible is the amount you pay yourself on a claim before your insurance pays the rest. For example, with a $1,000 deductible and a $5,000 covered loss, the insurer pays $4,000. Choosing a higher deductible usually lowers your premium, but it means paying more out of pocket when you claim.
- Employer's liability insurance
- Employer's liability insurance covers lawsuits from employees who say your negligence caused their work injury or illness, beyond what workers' comp benefits pay. It's usually included as Part Two of a workers' compensation policy in most states. In monopolistic states it may need to be bought separately as stop-gap coverage.
- Endorsement
- An endorsement is a written change to an insurance policy that adds, removes or changes coverage. Common examples include adding an additional insured, adding hired and non-owned auto coverage, or adding a waiver of subrogation. Endorsements can change your premium, so ask what each one costs.
- Errors and omissions (E&O) insurance
- Errors and omissions insurance, also called professional liability, covers claims that your professional service or advice was negligent, wrong or late and caused a client financial loss. It pays for defense costs and settlements. Insureon's 2026 data shows a median cost of $88 a month for professional liability or E&O.
- Exclusion
- An exclusion is a part of an insurance policy that lists situations or losses the policy won't cover. For example, general liability usually excludes employee injuries, professional mistakes and damage to your own property. Always read the exclusions section, because it defines the real limits of your coverage.
- Experience modification rate (EMR)
- An experience modification rate compares your business's workers' comp claims history with others in your industry. A rate below 1.0 means fewer claims than average and lowers your premium; above 1.0 raises it. Many general contractors check a subcontractor's EMR before hiring them for a project.
- Garagekeepers insurance
- Garagekeepers insurance covers damage to customers' vehicles while they're in your care, custody or control, such as at an auto repair shop, body shop or valet service. General liability and commercial auto policies usually don't cover customer cars in your care, so businesses that store or work on vehicles often need it.
- Hired and non-owned auto (HNOA)
- Hired and non-owned auto insurance covers your business's liability when employees drive their own cars, or rented or borrowed vehicles, for work. It doesn't cover damage to the vehicle itself. It's a common, inexpensive add-on for businesses without company vehicles whose staff still drive for errands or client visits.
- Inland marine insurance
- Inland marine insurance covers movable property such as tools, equipment and gear while it's in transit, at job sites or stored away from your main location. Despite the name, it has nothing to do with boats. Contractors, photographers and DJs often use it to protect expensive equipment they carry from job to job.
- Insurance limit
- An insurance limit is the maximum amount a policy will pay. Liability policies usually show a per-occurrence limit for any single incident and an aggregate limit for the whole policy period. For general liability, $1 million per occurrence and $2 million aggregate is the most common choice, according to Insureon's 2026 data.
- Liquor liability insurance
- Liquor liability insurance covers claims that your business sold or served alcohol to someone who then caused injury or damage, such as a car accident. General liability policies typically exclude these claims for businesses that sell or serve alcohol. Bars, restaurants, caterers and event businesses often need it.
- Monopolistic state
- A monopolistic state requires employers to buy workers' compensation from a state-run fund instead of a private insurer. North Dakota, Ohio, Washington and Wyoming are monopolistic states. Employers there often need separate stop-gap employer's liability coverage, because the state fund policy may not include it.
- Named insured
- The named insured is the person or business listed on the policy as the primary policyholder. It has the main rights and duties under the policy, such as paying premiums and reporting claims. Make sure your legal business name, including any LLC or corporation, is listed exactly as registered.
- Occurrence policy
- An occurrence policy covers incidents that happen while the policy is active, no matter when the claim is filed, even years later. Most general liability policies are written on an occurrence basis. Because coverage is tied to the date of the incident, you don't need tail coverage after cancelling.
- Per-occurrence limit
- The per-occurrence limit is the most your insurer will pay for a single incident, regardless of how many people are hurt or how much property is damaged. For example, a policy with a $1 million per-occurrence limit pays up to $1 million for one accident, subject to the overall aggregate limit.
- Product liability insurance
- Product liability insurance covers claims that a product you made, sold or distributed caused injury or property damage. It's often included in general liability through products-completed operations coverage, but businesses that manufacture or import products may need more. Online sellers and makers should check how their policy handles products.
- Professional liability insurance
- Professional liability insurance covers claims that a mistake, oversight or failure to deliver a professional service caused a client financial harm. It pays defense costs, settlements and judgments. It's also called errors and omissions (E&O) or malpractice insurance in some fields. Insureon's 2026 median is $88 a month.
- Self-insured retention (SIR)
- A self-insured retention is an amount your business must pay on a claim, including defense costs, before the insurer begins paying. It works like a deductible, but you typically handle and pay the claim yourself up to the SIR. It's more common in umbrella and larger commercial policies than in small-business policies.
- Stop-gap coverage
- Stop-gap coverage provides employer's liability protection in monopolistic states, where workers' comp is bought from a state fund that may not include employer's liability. It protects you if an employee sues over a workplace injury. It's often added to a general liability policy as an endorsement.
- Subrogation
- Subrogation is the right of an insurer, after paying a claim, to recover the money from whoever caused the loss. For example, if your insurer pays for fire damage caused by a contractor's mistake, it may pursue the contractor. A waiver of subrogation gives up this right against a specific party.
- Surety bond vs. insurance
- A surety bond guarantees to a client or government that you'll fulfill your obligations, such as finishing a job or following license rules. Unlike insurance, if the surety company pays a claim, you must repay it. Insurance protects you; a bond mainly protects the person you're working for.
- Tail coverage
- Tail coverage, or an extended reporting period, lets you report claims after a claims-made policy ends, for incidents that happened while it was active. It's important for professionals who retire, close a business or switch insurers. Without it, a claim filed after cancellation may not be covered.
- Third-party claim
- A third-party claim is a claim made against your business by someone outside it, such as a customer, client or member of the public, who says you caused them injury, damage or loss. General liability and professional liability policies are designed to cover third-party claims, not your own losses.
- Waiver of subrogation
- A waiver of subrogation is an endorsement in which you and your insurer give up the right to recover claim payments from a specific party, often a client or general contractor. Contracts frequently require it. Your insurer may charge a fee for adding a waiver of subrogation to your policy.
- Workers' compensation insurance
- Workers' compensation insurance pays medical bills and part of lost wages for employees injured or sickened on the job, and usually includes employer's liability coverage. Every state except Texas requires most employers to carry it once they reach the state's employee threshold. Insureon's 2026 median cost is $54 a month.