Commercial Insurance Glossary
This glossary defines the commercial insurance terms business owners run into most often — on certificates, in contracts, and during quotes and audits. Definitions are written in plain English by Focus West Insurance Solutions, a licensed West Coast brokerage (CA Lic. #0M32679). Use the quick links to jump to a topic, or start a 24-hour quick quote.
General & Liability
Commercial General Liability (CGL)
Coverage for third-party bodily injury and property damage your business causes, including products and completed operations. The foundation policy for most contractors and restaurants.
Additional Insured
A person or business added to your liability policy so they share in its protection, usually because a contract (a lease, or a general contractor's agreement) requires it. Often paired with "primary and noncontributory" and a "waiver of subrogation."
Aggregate Limit
The most an insurer will pay for all covered claims during the policy term, as opposed to the per-occurrence limit that applies to a single claim.
Occurrence
An accident or event that causes covered injury or damage. "Occurrence" policies respond based on when the event happened, regardless of when the claim is reported.
Completed Operations
Liability coverage for damage or injury that happens after a job is finished — for example, work a contractor completed that later fails. Critical for construction risks.
Primary and Noncontributory
Contract wording requiring your policy to pay first and without seeking contribution from the other party's insurance — frequently demanded alongside additional-insured status.
Waiver of Subrogation
An endorsement in which your insurer gives up its right to recover a paid claim from a third party you've agreed (by contract) not to pursue.
Certificate of Insurance (COI)
A one-page proof of coverage showing your policies, limits, and dates. Clients, landlords, and general contractors commonly require one before you start work.
Loss Run
An insurer-provided report of your past claims (dates, amounts, status) over a period — usually three to five years. Underwriters use loss runs to price and evaluate a risk.
Named Insured
The person or business specifically listed on the policy as the policyholder, with full rights and responsibilities under it.
Umbrella / Excess Liability
Coverage that sits above your primary GL and auto limits, providing additional protection when a large claim exhausts the underlying policy.
Business Owners Policy (BOP)
A packaged policy combining general liability and commercial property (and often more) for small and mid-sized businesses, usually at a lower cost than separate policies.
Workers' Compensation
Workers' Compensation
No-fault coverage that pays medical bills and lost wages for employees injured on the job. California generally requires it for any business with employees. Start a workers' comp quick quote →
Experience Modification (X-Mod)
A factor that raises or lowers your workers' comp premium based on your past claims versus what's expected for your class and size. Below 1.00 is a credit; above 1.00 is a surcharge.
Class Code
A WCIRB classification number that groups employees by the type of work they do. Premium is payroll multiplied by a rate for each class code; misclassification is a common source of audit disputes.
Employer's Liability
The part of a workers' comp policy that covers an employer against lawsuits related to a workplace injury that fall outside the no-fault workers' comp system.
Commercial Auto
Hired & Non-Owned Auto (HNOA)
Liability coverage for vehicles your business uses but does not own — rented vehicles and employees' personal cars driven for work, such as a pizza driver using their own car for delivery.
Garagekeepers
Coverage for damage to customers' vehicles in your care, custody, or control — relevant to repair shops, valets, and dealers.
Restaurant & Bar
Liquor Liability
Coverage for claims arising from serving alcohol — for example, injuries caused by an intoxicated patron. Essential for bars and restaurants with meaningful alcohol sales.
Dram Shop
Laws that can hold an alcohol seller liable for harm caused by an intoxicated customer. Liquor liability insurance responds to dram-shop claims.
Assault & Battery Coverage
Liability coverage (or exclusion buy-back) for injuries from fights or security incidents, especially relevant to bars, nightclubs, and venues with door staff.
Construction & Property
Wrap-Up (OCIP / CCIP)
A consolidated insurance program for a large construction project. An OCIP is owner-controlled and a CCIP is contractor-controlled; payroll on wrap-up jobs is handled separately from your own policy.
Builder's Risk
Property coverage for a structure while it's under construction, protecting materials and work in progress against fire, theft, and other covered losses.
Inland Marine
Coverage for movable property and tools/equipment that travel or are used at job sites — beyond what a fixed-location property policy covers.
Employee Benefits
Stop-Loss Insurance
Coverage that protects a self-funded or level-funded employee health plan against unexpectedly high claims, with "specific" (per-person) and "aggregate" (whole-plan) attachment points.
ICHRA
Individual Coverage Health Reimbursement Arrangement — lets an employer reimburse employees tax-free for individual health insurance instead of offering a group plan.
Applicable Large Employer (ALE)
An employer with 50 or more full-time-equivalent employees, subject to the ACA employer mandate and 1094-C/1095-C reporting.
Transportation
Motor Truck Cargo
Coverage for the freight a trucking operation hauls, protecting against loss or damage to a customer's cargo in transit.
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Frequently asked
What's the difference between an additional insured and a certificate holder?
A certificate holder just receives proof that coverage exists; an additional insured is actually added to the policy and shares in its protection. Contracts often require both.
Do I need hired & non-owned auto if my business owns no vehicles?
Often yes. If employees ever drive their own or rented vehicles for the business — deliveries, supply runs, catering — that creates hired & non-owned auto exposure even with no company-owned vehicles.
What raises my workers' comp X-Mod?
Claim frequency and severity over the prior years, relative to what's expected for your class codes and payroll. A strong return-to-work program and accurate class codes help keep it low.