It’s important to be specific, especially when it comes to insurance issues. You need to know exactly what you’re covered for, when your coverage can be used and what your responsibilities are in the event of a loss or a claim. But insurance terms can be difficult to decipher, and problems can arise when you don’t quite understand what the word or phrase is describing.
The good news is that many of the most common insurance terms are fairly easy to decode. Once you get a better handle on these general definitions, you’ll feel more confident when the time comes to make insurance decisions.
The A to Z of insurance speak
Not surprisingly, there’s a big catalogue of insurance terms out there. Instead of getting lost in the fine print, get in touch with some of these common words and phrases:
Accounts receivable insurance: if your customers default on their payments, accounts receivable insurance can help protect your profit margin and free up your cash flow.
Act of God: it may sound supernatural, but in the insurance industry an “Act of God” is an event that is attributed to natural causes, involving no human intervention. These events can’t be predicted or prevented, and nobody is responsible.
Adjuster: this is the insurance company representative assigned to investigate your claim. They’ll determine the extent of your business’ liability for loss once your claim is submitted.
Business interruption insurance: if a covered loss interrupts your regular business operations, business interruption insurance will reimburse you for any lost net profits and expenses required to help you support your business until you can get it up and running again.
Deductible: this is the portion of an insured loss that you have to pay yourself before your insurance company covers the remaining expenses pertaining to the loss.
Depreciation: the decrease in value of any type of property over a period of time resulting from use, wear and tear or obsolescence.
Indemnity: compensation or reimbursement for sustained loss or damage.
General liability: covers injuries to customers, suppliers, employees or visitors to your property. You would also be covered if you or your staff caused injury to a third party or their property while you conducted off-site business.
Loss of use: insurance protection against a loss resulting from the inability to use property due to damage or destruction.
Peril: the cause of loss. Fire, flooding and collision are all examples of peril.
Product liability: this coverage protects you if a product you make or sell is found to be defective, or if there are inaccuracies in the assembly instructions or warnings.
Professional liability: covers legal costs and expenses if a customer claims that you failed to deliver on what was outlined in a contract, or that you mismanaged a project. Professional liability would also apply to medical professionals being sued for malpractice.
Total loss: When the cost of damage repair exceeds the value of your property.
Getting to know your policy
It’s good to know some insurance lingo, but you don’t need to become an insurance expert to get the right coverage for your business. Your knowledgeable broker is always there to help you determine what coverage you need and to help with any questions or concerns, and there are plenty of resources for you to explore on the Northbridge website.