Commercial insurance definitions

By Leana Schwartz, Independent Commercial Insurance Agent

Insurance policies are loaded with special terminology. Many are self-explanatory (such as “accident” or “exclusions”) but others are not as intuitive. Here are some common commercial insurance terms and their definitions.

commercial insurance definitions long beach commercial insurance agencyAggregate limit

Aggregate limit refers to the maximum amount an insurer is obligated to pay out to the policyholder during a specific insurance policy period.

Blanket insurance

Blanket insurance is a single policy under which a business owner can insure one property type at multiple locations or multiple types of property at a single location.

Business owner’s policy (BOP)

This type of policy provides insurance protection for both general liability and property claims. This type of insurance generally provides more complete coverage with lower premiums than would be the case if each type of insurance were purchased separately.

Contractual liability coverage

This type of insurance provides for legal defense of and repair coverage for certain liabilities which are assumed in a written contract.


Declarations are the portions of an insurance policy that contain information specific to the insured business such as the business name, address, deductibles, premiums, policy terms, and liability limits for the insurance policy the business purchases.


The deductible is the specific dollar amount the policyholder must pay out-of-pocket before the insurance company starts paying towards a covered loss. For example, if the deductible is $1,000 and the covered claim is for $10,000 in damages, the insurance provider would pay $9,000 against the claim.


An endorsement is a written addendum to an existing insurance policy to change original policy language and/or coverage – sometimes also called a “rider.”

Excess liability insurance

This type of insurance provides additional coverage above the primary liability insurance limits, in the event the primary policy limits are exceeded in a loss.

Hold harmless agreement

A hold harmless agreement is part of a written contract in which one party waives the right to seek compensation for a claim of liability against the other party to the contract.

Limits of liability per occurrence

This is the maximum amount an insurance carrier agrees to pay the policyholder for a single occurrence of a covered claim under a specific policy.

Named peril

A named peril is any covered hazard or event specifically listed on a commercial insurance policy.

Premises liability coverage

This type of insurance protects a business against liability to a third party which occurs on the business property, such as a customer slipping on a wet floor.


After an insurance company pays a claim for a covered loss, it has the option to seek and recover compensation from the party who is responsible for the damages. For example, if a roofing contractor sets a building on fire while applying a hot tar roof, the insurance company will pay the business owner for the damages, but can then file a lawsuit against the roofing contractor for the amount of the claim.

Umbrella insurance

Umbrella insurance is extra liability coverage used to increase a business’ ability to cover any court judgments or settle claims in the event of a substantial lawsuit. This type of insurance is most often sold in increments of $1 million and for a relatively low cost.

Do you have questions about commercial insurance terminology and definitions? Contact Long Beach independent insurance agency NHC Insurance Services. NHC serves clients in Long Beach and the greater South Bay area of Los Angeles, including Signal Hill, San Pedro, Wilmington, Lomita, Torrance, and surrounding communities.