12 insurance terms and how they can impact your business

Added August 31, 2021

As you review your business insurance policy, you may encounter a few terms and phrases you're not familiar with or don't fully understand. When it comes to business insurance terminology, guessing isn't good enough—you need to understand the full meaning of your policy.

To help you better understand your insurance coverage, here are 12 important insurance terms and phrases, what they mean, and how they can ultimately impact you and your company.

Insurance adjuster

If you've ever had to file a claim, you likely worked with an insurance adjuster—an individual who investigates, manages, and settles claims submitted to an insurance company.

Keep in mind: An insurance adjuster isn't the same as an insurance agent. Your insurance agent helps you create your policy and keeps you apprised of your claims, but they usually aren't directly involved in handling your claims.

There are three different types of insurance adjusters:

  • In-house: This type of adjuster works for an insurance company.

  • Independent: This type of adjuster doesn't work for an insurance company. Rather, they are hired by an insurer to handle the claims process.

  • Public: A public adjuster is someone you can hire to handle your claim. They act as a liaison between you and your insurance company. According to Tom Richey, Hortica claims manager, public adjusters are compensated with either an agreed percentage of the claim value or a flat fee. "If you aren't satisfied with the service of your insurance company, hiring a public adjuster can be done any time during the claims process," Richey said.

Declarations page

When looking at a copy of your insurance policy, the declarations page is one of the most important pages to review. This page is often the first page of your policy, and it lists key details of your plan, including:

  • Who or what's covered

  • Your policy number

  • Your policy term

  • Your coverages

  • Your coverage limits

  • Your discounts

  • Your premium costs

This page is a condensed version of your policy, summarizing the main details. When you examine your policy, make sure the information on this page is accurate. Review the rest of your policy document for the finer details, including information related to many of the terms and phrases covered below.

Additional insured

As the policyholder, you're also known as the insured by your insurance company. An additional insured is anyone else listed on your policy who has an insurable interest.

Think of your car insurance coverage. You're the policyholder, but your kids might also be listed on your policy. Your kids would be recognized as the additional insureds in this example.

It's important you include all the individuals you want designated as additional insureds on your policy because your policy will only cover the individuals you identify up front.

Aggregate limit

An aggregate limit is the maximum amount your insurance provider will pay you for covered losses during the term of your policy. You can usually choose this limit based on your risk, exposure, and budget.

This limit is probably the most familiar number to you on your policy. For instance, you might have a $300,000 general liability policy. That means $300,000 is the maximum payout your insurance carrier will provide you for covered losses under the terms of your current policy.

However, keep in mind that $300,000 may not be the amount paid out if you have a single $300,000 claim. Let's review why by moving on to our next important insurance term.

Per-occurrence limit

A per-occurrence limit is the maximum amount your insurer will pay for a single, covered loss that meets the terms of your policy.

Here's why you need to know if this limit is in your policy language: Let's say you have a $500,000 general liability policy. If one of your customers slips and falls in your greenhouse or at your garden center and files a claim against you for their injuries, you may believe you're covered up to $500,000. That might not be accurate.

That $500,000 could be your aggregate limit. Your per-occurrence limit might only be $250,000. If another similar claim occurs during the same policy term and your policy again pays the $250,000 per-occurrence limit, you'll reach the $500,000 aggregate limit for that policy year.

Understand what types of limits are included in your policy and adjust those limits based on your situation.

Occurrence-based coverage

This type of policy pays for any covered losses you incur during your policy's terms—even if your policy is no longer active.

An occurrence-based plan is geared toward longtail events—an issue or work performed that could have an impact many years later.

Occurrence-based policies can still help protect you even if you've since switched insurance companies or canceled the previous policy and haven't replaced it with a new one.

Timely reporting of claims

You might see this phrase in your policy as part of your duties as an insured. This means you're required to report a loss as soon as possible or within the timeframe as stated in your policy.

Your initial report to your insurance company to begin the claims process is known as the first notice of loss (FNOL). This step is very important, as it sets your claims process in motion, and some insurance companies require you to notify them of a loss within a specific amount of time.

There are other reasons you should act fast. Timely reporting of claims can help you:

  • Close your claim more quickly

  • Keep medical costs down

  • Identify potential fraud

  • Reduce your legal risk

If you call in your claim, you can often receive a claim number and begin the claims process by the time the call ends. If you submit your claim online or via email, it can take up to 48 hours for the process to begin.


By its basic definition, an indemnity is a contract agreement in which one party (in this case, your insurance company) agrees to compensate another party (you) for a loss.

Don't be confused if this word is used during your discussions with your provider. In essence, an indemnity is your insurance contract. You agree to pay your insurance carrier a premium, and in turn, your insurance company agrees to cover your losses following the terms of your agreed-upon policy. Just be sure the listed terms of your indemnity align with what you agreed to.

Fiduciary duty

Fiduciary duty is a fancy way of saying to act in the best interests of another party. As part of an insurance contract, your insurance carrier has a duty to act in your best interest both legally and ethically. This means they must disclose all essential facts regarding your policy and be honest in all dealings.

You also have a fiduciary duty to follow the terms of your insurance policy, be honest in your interactions, and not commit acts of fraud.

Replacement cost

Replacement cost is an especially important concept when it comes to your equipment and property.

In some cases, replacement cost is written to help cover the cost to repair or replace an item of similar type and quality. This shouldn't be confused with a replacement cost option, which features the term “actual cash value.”

Actual cash value

In other cases, replacement cost might be based on the item's actual cash value at the time of the loss. The actual cash value is usually much less than the cost of a new piece of equipment. For instance, the actual cash value of your 10-year-old tractor is far less than the cost of a new tractor bought off the dealership lot.

Understand the terms of your replacement cost coverage so you know the details and aren't surprised later.

Exclusive remedy

This term is associated with workers' compensation. Exclusive remedy prohibits your employees from suing you for work-related injuries if they're currently receiving workers' compensation benefits from you.

However, this provision doesn't mean you're protected against all possible litigation. For instance, you still can be found negligent if your operations lead to employee injuries or illnesses. Exclusive remedy stipulations vary by state, so discuss this option with your provider to understand the terms of this coverage where your business is located.

We understand insurance coverage terms and policy language can be complex. But you’re not alone when trying to ensure your business is properly protected. We can help you. If you have questions about your business insurance policy, contact us. We’re happy to walk through your policy with you and explain your important terms and details.

Related links:

Check out the top risks for horticultural businesses like yours and learn about the insurance coverages that can help protect you.

Your business insurance policy should evolve as your operations and risks change. Use our insurance renewal checklist to help you analyze where your business has changed.

Providing workers’ compensation insurance to your seasonal workers can help protect your business and your employees. Learn how here.

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