Key restaurant business insurance terms and definitions you should know.
When you buy insurance for your restaurant, you’ll get a policy explaining your coverage and how it works. We often get questions about words and terms within the policy. To help know better understand what you are buying, we have created this glossary of key business insurance terms and definitions.
THE MOST COMMON INSURANCE TERMS AND WHAT THEY MEAN
FBH Insurance
Every specialization has a language of its own that takes time to understand – and insurance is no exception! But with insurance, your ability to know the common terms and what they mean is crucial to protecting yourself and your business. We want to provide you with the most common insurance terms and what they mean to make sure that you are both informed and protected.
Additional Insured:
An additional insured is a type of status associated with general liability insurance policies that provide coverage to other individuals or groups that were not initially named in the policy.[1]
Business Interruption Insurance:
Business interruption insurance is an insurance coverage that replaces business income lost in a disaster.[2] These disasters include physical damage from a fire, hurricane, windstorm, tornado, hailstorm, lightning, or wildfire.[3] Some policies even cover the losses if the business is closed because of theft, vandalism, or civil commotion.[4] It is an optional add-on that can be included as part of a standard business insurance policy.[5]
Business Owner’s Policy (BOP):
A business owner’s policy is an insurance policy that combines several different property and liability protections into a single policy for small-business owners.[6] A BOP typically includes three types of insurance: (1) general liability insurance, (2) business property insurance, and (3) business interruption insurance.[7]
Certificate of Liability Insurance:
Certificates of liability insurance is a one-page document that summarizes your coverage and can be used as proof of insurance.[8] The form includes policy details, like coverage limits and effective dates, so businesses can find and share them without revealing private information.[9]
Claims-Made Insurance Policy:
A claims-made insurance policy is a policy providing coverage that is triggered when a claim is made against the insured within the policy period, regardless of when the wrongful act that gave rise to the claim ever took place.[10] An exception to this concerns the retroactive date. The wrongful act that gave rise to the claim must have taken claim on or after the retroactive date.[11]
Commercial Umbrella Insurance:
Commercial umbrella insurance helps in paying liability claims that exceed the limits of an underlying insurance policy.[12] Example of what this policy would cover include the costs of legal expenses, medical bills, damage to someone else’s property and court judgments and settlements.[13]
Comprehensive General Liability Insurance:
Comprehensive general liability is a type of insurance policy providing coverage to a business for bodily injury, personal injury, and property damaged caused by the business’s operations, products, or injuries occurring on the business’s premises.[14]
Cyber Liability:
Cyber liability insurance covers any financial losses that result from data breaches and other cyber events.[15] Any business that stores or processes sensitive information should consider protecting their business with cyber liability insurance.[16] It can cover costs ranging from investigative services, data recovery and identity recovery to damages impacting customers or business partners.[17]
Data Breach Insurance:
While data breach insurance falls within the umbrella of cybersecurity insurance, it specifically focuses on the unauthorized access or exposure of private data directly from your company.[18] This applies when confidential information is accessed, like financial information, customers’ personal information (credit card numbers, health information) and employee data like one’s Social Security numbers and W-9 forms.[19]
Declarations Page:
A declaration page, also known as the information page, is the front page(s) of a policy that specifies the named insured, address, policy period, location of premises, policy limits, and other key information varying from insured to insured.[20]
Directors and Officers Liability Insurance (D&O):
Directors and officers liability insurance is insurance coverage intended to protect individuals from personal losses and legal fees if they are sued because of serving as a director or officer of a business.[21]
Deductible:
An insurance deductible is the amount taken out of an insurance check when you make certain types of claims.[22] Deductibles are present in auto insurance, homeowners insurance, health insurance, and pet insurance to name a few.[23]
Employment Practices Liability Insurance (EPLI):
Employment practices liability insurance covers businesses against claims from their employees that their legal rights as employees of the company have been violated.[24] It provides protection against many employee lawsuits, including claims of sexual harassment, discrimination, wrongful termination, breach of employment contract, negligent evaluation, failure to employ, wrongful discipline, etc.[25]
Endorsement:
An insurance endorsement adds, deletes, excludes, or changes insurance coverage.[26] It may also be used to increase standard limits of coverage and take precedent over the original agreement of policy.[27] Insurance endorsements are also known as an insurance rider.[28]
Errors and Omissions Insurance (E&O):
Errors and omissions insurance is a type of professional liability insurance that protects companies, their workers, and other professionals against claims of inadequate work or negligent actions.[29]
Exclusion:
Exclusions are the cases where the insurance company does not provide coverage.[30] These are the conditions excluded from the insured event to avoid losses to the company.[31]
Hired and Non-Owned Auto Insurance:
A hired and non-owned auto insurance policy covers commercial liability expenses caused by accidents involving hired (rental cars) or borrowed vehicles (employee-owned) for business use.[32] A common example of this is pizza delivery vehicles.[33]
Named Insured:
A named insured is any person, firm, or organization, or any of its members specifically designated as an insured in an insurance policy.[34]
[1] Julia Kagan, Additional Insured, Investopedia (Nov. 14, 2021), https://www.investopedia.com/terms/a/additional-insured.asp.
[2] Julia Kagan, Business Interruption Insurance, Investopedia (May 31, 2021), https://www.investopedia.com/terms/b/business-interruption-insurance.asp.
[3] Kimberly Lankford, What is Business Interruption Insurance and What Does it Cover?, U.S. News (Apr. 23, 2021), https://money.usnews.com/money/personal-finance/saving-and-budgeting/articles/what-is-business-interruption-insurance.
[4] Id.
[5] Id.
[6] Priyanka Prakash & Rosalie Murphy, Business Owner’s Policy (BOP): What it Covers, How to Get it, Nerdwallet (Jan. 21, 2022), https://www.nerdwallet.com/article/small-business/business-owners-policy.
[7] Id.
[8] Tricia Tetreault, Certificate of Liability Insurance: What it is & How to Request One, Fit Small Business (June 16, 2021), https://fitsmallbusiness.com/certificate-of-liability-insurance-coi/.
[9] Id.
[10] Claims-Made Policy, IRMI, https://www.irmi.com/term/insurance-definitions/claims-made-policy (last visited Mar. 24, 2022).
[11] Id.
[12] Lucy Lazarony & Amy Dabise, What is Commercial Umbrella Insurance?, Forbes Advisor (May 17, 2021), https://www.forbes.com/advisor/business-insurance/commercial-umbrella-insurance/.
[13] Id.
[14] Julia Kagan, Commercial General Liability (CGL), Investopedia (Oct. 24, 2020), https://www.investopedia.com/terms/c/commercial-general-liability-cgl.asp.
[15] Marianne Bonner, What Does Cyber Liability Insurance Cover?, the balance small business (Mar. 12, 2021), https://www.thebalancesmb.com/what-is-covered-under-a-cyber-liability-policy-462459.
[16] Lucy Lazarony, How Cyber Liability Insurance Can Rescue a Small Business, Forbes Advisor (Sept. 10, 2021), https://www.forbes.com/advisor/business-insurance/cyber-liability-insurance/.
[17] Id.
[18] Whitney Vandiver, Data Breach Insurance: What it is, Which Businesses Need it, Nerdwallet (Aug. 12, 2021), https://www.nerdwallet.com/article/small-business/business-data-breach-insurance.
[19] Id.
[20] Declarations, IRMI, https://www.irmi.com/term/insurance-definitions/declarations (last visited March 24, 2022).
[21] Julia Kagan, Directors and Officers (D&O) Liability Insurance, Investopedia (Mar. 4, 2022), https://www.investopedia.com/terms/d/directors-and-officers-liability-insurance.asp.
[22] Amy Danise, What is an Insurance Deductible?, Forbes Advisor (Jan. 12, 2022), https://www.forbes.com/advisor/insurance/insurance-deductible/.
[23] Id.
[24] What is Employment Practices Liability Insurance (EPLI)?, Insurance Information Institute, https://www.iii.org/article/what-employment-practices-liability-insurance-epli (last visited Mar. 24, 2022).
[25] Id.
[26] Jim Donelon, Insurance 101: What is an Insurance Endorsement or Rider?, Louisiana Department of Insurance, https://www.ldi.la.gov/docs/default-source/documents/publicaffairs/january-insurance-101-endorsement-or-rider.pdf?sfvrsn=65e04d52_6 (last visited Mar. 24, 2022).
[27] Id.
[28] Id.
[29] Jake Frankenfield, Errors and Omissions Insurance (E&O), Investopedia (Feb. 16, 2022), https://www.investopedia.com/terms/e/errors-omissions-insurance.asp.
[30] Definition of ‘Exclusions,’ The Economic Times, https://economictimes.indiatimes.com/definition/exclusions (last visited Mar. 24, 2022).
[31] Id.
[32] Bethan Moorcraft, Hired and Non-Owned Auto Insurance – Everything you Need to Know, Insurance Business America (Apr. 19, 2019), https://www.insurancebusinessmag.com/us/guides/hired-and-nonowned-auto-insurance–everything-you-need-to-know-165258.aspx.
[33] See Id.
[34] Named Insured, IRMI, https://www.irmi.com/term/insurance-definitions/named-insured (last visited Mar. 24, 2022).