THE FRIEND GLOSSARY OF SMALL-BUSINESS INSURANCE

Someone else, usually a landlord, general contractor or client, added to your liability policy so it also protects them for claims that come from your work or your space. It is done by endorsement, not by listing them on a certificate.

An admitted carrier is licensed in your state, files its rates (basically how it prices your policy and the math behind it) with the state regulator and is backed by the state guaranty fund if it fails to be able to service your policy and pay your claim. A non-admitted carrier does not file its math with the state, prices more freely, and takes the special and unique risks admitted carriers turn down.

When one insurer can see a risk clearly and another cannot, the good risks drift to the carriers that price them fairly and the bad risks pile up on the balance sheet of the insurer that does not. Blended pricing is how you lose the customers you most want to keep.

Money from pension funds and other investors that backs insurance carrier risk transfer directly, through catastrophe bonds, sidecars, and similar vehicles, instead of transferring carrier risk through a traditional reinsurer.

The dollar amount of loss an insurer eats before its reinsurance starts paying. It is the insurer’s deductible. In 2026 reinsurers cut their price and kept the attachment point where it was, which is why the market looks cheaper and the insurers still feel it.

When an insurer unreasonably denies, delays or underpays a valid claim. Depending on the state, it can owe more than the policy limit as a result. Documentation on both sides decides these fights.

To put coverage in force. A quote is a price; a bound policy is protection. A binder is the temporary proof issued until the policy arrives. An "indicative" quote is a ballpark that cannot be bound.

All the policies an insurer, agency or program holds together. Insurers price and manage risk at the level of the book, which is why one account’s price can move because of everyone else’s claims.

Sorting small businesses into broad classes (all delis, all contractors) and charging each one the average loss of the class. Cheap for the insurer to run. Expensive for the careful operator, who pays for the careless one in the same bucket.

Replaces lost income and keeps paying ongoing bills like rent and payroll when covered physical damage, say a fire, forces you to close. It usually requires provable damage at your premises and starts after a waiting period.

A bundle of commercial property and general liability, usually with business interruption, sold as one policy to small businesses. Cheaper than buying the pieces separately. Workers’ comp, commercial auto, professional liability and liquor liability are typically not included.

How much risk insurers are able and willing to write, which depends on the capital behind them. Lots of capacity means competition and lower prices; scarce capacity means the opposite.

A purpose-built insurance company that a business, or a group of businesses, forms to insure itself. Premium goes into a pool the owners control, claims are paid from it, and what is left over stays with the business owners instead of a carrier.

The insurance company that issues your policy and pays the claims. Your broker or agent sells and services the policy; the carrier carries the risk.

The lines that pay when your business gets sued or someone gets hurt: general liability, auto liability, workers’ comp and umbrella. The other half of "property and casualty." In 2026 casualty prices kept rising while property insurance prices fell.

A bond that pays investors a yield unless a defined disaster, a hurricane or earthquake, happens. If it does, investors lose some or all of their invested principal, which pays the insurer’s losses. Part of the "insurance-linked securities" market.

A one-page summary that proves you have coverage: who insures you, the policy numbers, the limits and the dates. Usually on a standard form called ACORD 25. It proves the policy exists. It does not change what the policy covers.

The industry label an insurer assigns your business, which sets its base rate. Workers’ comp uses numbered codes for each job type; a full-service restaurant and a fast-food counter can land in different ones.

How a carrier assigns your business to a rate class: a code for your industry, tied to a filed rate per unit of exposure. It is the formal machinery behind the bucket, and the reason two very different shops in the same class get the same price.

A property-policy rule that you must insure the building or contents to a set share of their value, often 80% or 90%. Insure for less and every claim is cut by the same shortfall, even a small one.

The money a captive’s owners post, on top of premium, to stand behind a bad year that premium alone cannot cover. It is the catch said up front: a captive rewards the well-run by asking them to back their own risk with real money, not just a signature.

Claims plus the insurer’s expenses, divided by premium. Under 100 means the insurer made money on the policies themselves; over 100 means it relied on investment income from your banked premium to break even.

Coverage for vehicles your business owns or leases: liability if the driver causes a crash, plus damage to the vehicle itself. Personal auto policies usually exclude business use, so the delivery van needs its own.

Covers money and property lost to theft, fraud or forgery, including theft by your own employees and fraudulent payment instructions. Property policies usually exclude employee theft. Also called a fidelity bond.

Covers the physical things your business owns or is responsible for: the building if you own it, improvements if you lease, equipment, furniture and inventory. Pays for fire, theft, storm and similar sudden damage, minus the deductible.

Covers the costs of a data breach or cyberattack: notifying customers, forensics, restoring systems, lost income while down and claims from people whose data leaked. Any business that takes cards or stores customer data has the exposure.

The first pages of a policy, which list who is insured, the address, the policy period, each coverage, its limit, the deductible and the premium. The rest of the policy explains what those numbers mean.

Premium is what you pay to have the policy. Deductible is what you pay first on each claim before the insurer pays. Limit is the most the insurer will pay. Raise the deductible and the premium falls; raise the limit and it rises.

A state law that lets people injured by an intoxicated person sue the bar or store that served them. New York and Michigan both have one. It is why liquor liability exists as its own policy.

Coverage for claims from employees or applicants: discrimination, harassment, retaliation, wrongful termination. Legal defense is the big cost. Wage-and-hour claims are usually excluded or capped low.

A written change to a policy that adds, removes or alters coverage: naming an additional insured, adding spoilage coverage, excluding a risk. Also called a rider. Endorsements override the standard wording they change.

Covers repair and lost income when equipment fails from inside: an electrical short, a motor burnout, a compressor failure. Standard property policies exclude this kind of mechanical breakdown. Often added to a BOP.

The part of the market where non-admitted carriers write risks the standard market will not: unusual operations, heavy claims history, high liquor sales. More flexible terms, usually higher prices, placed through specialist brokers.

The list of things a policy will not pay for, written into the policy itself. Standard ones include flood, wear and tear, intentional acts and, on general liability, professional mistakes and liquor. Some can be bought back with an endorsement.

A multiplier on your workers’ comp premium that compares your injury claims with what is expected for a business your size and type. 1.00 is average. 0.85 is a 15% credit; 1.25 is a 25% surcharge.

Frequency is how often claims happen. Severity is how much each one costs. Insurers read them separately: many small claims suggest a habit, one large claim may be bad luck. Recent trend in the market: fewer injuries, each one costlier.

Coverage for claims that your business injured someone or damaged their property, plus personal and advertising injury such as libel. The customer who slips, the delivery that dents a car. Also called commercial general liability, or CGL.

A captive owned by many unrelated businesses that insure each other. Members usually pay their own smaller claims and share the larger ones, with reinsurance on top. Good years come back as dividends.

A state-run fund, paid for by admitted insurers, that pays claims up to a cap if an insurer goes insolvent. Non-admitted carriers and risk retention groups are not covered by it.

Hard: insurers have lost money, capacity is scarce, prices rise and terms tighten. Soft: capital is plentiful, prices fall and insurers compete for accounts. The market turned soft in 2026 for the first time since 2017. The small account barely noticed.

Liability coverage for crashes in vehicles your business does not own: an employee’s car on a supply run, a rental for an event. It covers claims against the business. It does not repair the employee’s car.

A contract clause in which one side agrees to cover the other’s losses or legal costs from a claim. Also called indemnification. Leases and vendor contracts often shift the landlord’s or client’s risk onto the small business this way.

Despite the name, this is coverage for property that moves or sits off your premises: tools, catering equipment, goods in transit, a food truck’s kit. A property policy usually covers things only at your address. It’s stuff moving around, just not always by boat.

An agent represents one or more insurance companies and sells their policies. A broker represents you and shops across companies. Independent agents sit between the two. Most are paid a commission out of your premium.

An insurance company or service built around software: online quoting, automated underwriting, faster claims. Some only sell policies; "full-stack" insurtechs also carry the risk.

Coverage for claims that alcohol you served or sold contributed to an injury, like a patron who drives after leaving. General liability excludes this for businesses that sell alcohol, so bars and restaurants buy it separately.

The part of an insurance rate meant to pay expected claims, published by a rating bureau for each job class. Each insurer multiplies it by its own factor for expenses and profit to get your rate.

Claims paid divided by premium collected. A 60% loss ratio means sixty cents of every premium dollar went to claims. Insurers watch it by coverage line and by customer; so do the groups that decide who joins a captive.

The report your insurer keeps of every claim on your policy: date, type, what was paid, what is still open. It is the record they read before they quote you. You can request yours any time. Most operators never have.

A firm that underwrites and prices policies on an insurance carrier’s behalf, under delegated authority, often for a niche like restaurants or contractors. The carrier holds the risk; the MGA makes the decisions.

The person or business entity the policy is written for, shown on the declarations page. Only the named insured has the full rights under the policy. It should match your legal entity exactly.

The National Council on Compensation Insurance, the organization that publishes workers’ comp loss costs and calculates experience mods in most states. New York and Michigan run their own bureaus instead.

A jury award of $10 million or more. There were nearly 200 in 2025, up 41% on the year before, worth about $25.6 billion in total. Hotels and restaurants are on the list of industries most exposed.

Two ways a policy decides which year pays. Occurrence covers incidents that happen while the policy is active, whenever the claim arrives. Claims-made covers claims filed while it is active, for incidents after a set retroactive date. General liability is usually occurrence.

The two ceilings on a liability policy. Per occurrence is the most it pays for any one incident. Aggregate is the most it pays for everything in the policy year. "$1M/$2M" means $1 million a claim, $2 million a year.

Your legal responsibility for injuries that happen on your property: the wet floor, the loose handrail, the pallet in the aisle. Covered by general liability. Now one of the fastest-growing sources of very large jury awards.

A review after the policy year ends that checks your actual payroll or sales against the estimate the premium was based on. Come in higher and you get a bill; lower and you get a refund.

Borrowing to pay an annual premium, then repaying the lender monthly with interest. Common for large packages. Miss a payment and the lender can cancel the policy to recover the unearned premium.

Setting an insurance price on how much a customer will tolerate, using data on shopping habits and switching, rather than on the risk. Michigan’s regulator barred it in 2024; SB 1013 makes the ban law.

Your responsibility for injuries caused by something you made or sold. For a restaurant, that includes the food. Usually part of general liability as "products and completed operations," with its own aggregate limit.

Coverage for claims that your advice or professional service caused someone a financial loss: the wrong spec, the missed deadline. General liability excludes these. Also called errors and omissions, or E&O. Usually written claims-made.

A clause in a property policy that makes fire coverage depend on your alarm, sprinklers, or hood suppression being in working order. If the system was off or unserviced when the fire started, the insurer can deny the claim.

The document an insurer submits to a state regulator to set or change its prices and rules. In most states filings for small-business lines are public, which is how price increases can be checked before renewals arrive.

Insurance that insurers buy for themselves, so one hurricane or one enormous verdict does not sink them. Its price is set once a year, mostly on January 1, and it sets the tone for every renewal underneath it.

Two ways to value a property claim. Replacement cost pays to replace what was lost with new. Actual cash value pays replacement cost minus depreciation, so a ten-year-old oven pays out like a ten-year-old oven.

An insurance company owned by the businesses it insures, created under the federal Liability Risk Retention Act of 1986. Members share a line of business. It can write liability coverage only and is not backed by state guaranty funds.

Paying your own claims instead of buying a policy for them. Every deductible is a little of it. Formal self-insurance, especially for workers’ comp, takes state approval, a deposit and excess coverage.

A pot of outside investor money bolted onto an insurer or reinsurer to take a share of its risk, and its profit, for a set period. More sidecars mean more capacity chasing the same premium.

The rise in liability claim costs beyond ordinary inflation, driven by bigger jury awards, more lawsuits, attorney advertising and outside funding of lawsuits. It is the main reason liability and umbrella prices keep climbing.

Covers food and other perishable stock lost when refrigeration fails or the power goes out. Often an add-on to a property policy or BOP, with its own limit. Outages that start off your premises may need separate utility coverage.

After paying your claim, your insurer steps into your shoes to recover the money from whoever caused the loss. A waiver of subrogation, common in leases and contracts, gives up that right against a named party.

A guarantee, backed by a surety company, that you will do what a license or contract requires. If you do not, the surety pays the other party and then collects from you. It protects them, not you.

An extension, formally an extended reporting period, that lets a claims-made policy keep accepting claims for past work after the policy ends. Bought when a business closes, sells or switches to a carrier that will not cover earlier incidents.

Outside investors paying the costs of a lawsuit in exchange for a share of any award. It lets more cases go to trial and stay there longer, which pushes settlements and verdicts up.

Extra liability coverage that sits on top of your general liability and auto policies and pays when a claim blows past their limits. It is the line where big verdicts are priced in, which is why it has risen every quarter since the end of 2017.

The person, or the software, at the insurance company who decides whether to insure you and on what terms: price, limits, deductible, exclusions. "Referred to underwriting" means a person needs to look.

A contract clause, backed by a policy endorsement, in which you agree your insurer will not try to recover a claim payment from a named party, usually a landlord or client. Common in leases and construction contracts.

Required coverage in almost every state once you have employees. It pays medical bills and lost wages for work injuries and, in exchange, generally keeps employees from suing you over them. Priced on payroll, job class and your record.