Business insurance has its own vocabulary, and the terms show up everywhere: in investor term sheets, customer contracts, renewal quotes and claims. This glossary defines the terms startups and tech companies run into most, in plain language.

Terms are grouped by topic: policy basics, liability coverages, property and business interruption, contract terms, claims and policy structure, and how insurance is bought. Definitions are general. Your policy's own wording always controls, so check it, or ask your broker, before relying on any term.

Policy basics

Premium

The price you pay for an insurance policy, usually quoted for a 12-month term. It can be paid upfront or in installments, and may change at renewal.

Limit of liability

The most the insurer will pay under a policy or coverage part. Policies often have a per-claim (or per-occurrence) limit and an aggregate limit, which is the most the policy will pay for all claims during the policy period.

Retention

The portion of covered loss the insured must bear before the insurer pays under the applicable coverage. A self-insured retention may also leave the insured responsible for handling or funding defense and settlement costs below that amount. Check which costs count toward the retention and when the insurer's obligations begin.

Deductible

The portion of a covered loss allocated to the insured. In property insurance, it's commonly subtracted from the claim payment. In liability insurance, the insurer may handle the claim and seek reimbursement of the deductible. Deductibles can be fixed amounts or percentages; time-based loss-sharing provisions may also apply.

Claims-made policy

A policy generally triggered by a claim first made against an insured during the policy period or an applicable extended reporting period, subject to its terms. Many forms also require the claim to be reported within a specified period. If a retroactive date applies, the underlying act must fall on or after that date. Prior-knowledge exclusions, continuity provisions and other conditions also affect coverage.

Occurrence policy

A policy that covers injury or damage that happens during the policy period, even if the claim is made years later. Commercial general liability is usually written on an occurrence basis.

Retroactive date

A date used in many claims-made policies to exclude claims arising from acts, errors or omissions occurring before it. Maintaining the applicable retroactive date when renewing or switching insurers helps preserve prior-acts protection, but coverage still depends on reporting requirements, prior-knowledge provisions, exclusions and other terms.

Tail coverage (extended reporting period)

An extended reporting period (ERP), often called tail coverage, provides additional time after a claims-made policy ends to make or report eligible claims, as specified by the endorsement. It generally applies to acts occurring before termination and on or after any applicable retroactive date. It doesn't cover new acts after termination or automatically add new limits. Businesses may need it when changing coverage, being acquired or winding down.

Policy period

The dates during which a policy is in effect, usually one year.

Renewal

The process of continuing a policy for another term. Insurers may change price, limits, retentions or terms at renewal, so it's the natural time to review coverage.

Liability coverages

Directors and officers (D&O) insurance

Covers directors, officers and often the company for claims alleging wrongful acts in managing the business, such as breach of fiduciary duty or misleading investors. Commonly requested by investors and outside board members.

Side A, Side B and Side C

Common D&O insuring agreements. Side A protects insured individuals for covered loss the company doesn't indemnify, subject to the policy's non-indemnification provisions. Side B reimburses the company for covered indemnification of directors and officers. Side C provides specified entity coverage; public-company forms commonly limit it to securities claims, while private-company forms may provide broader protection.

Errors and omissions (E&O) insurance

Also called professional liability. Covers claims that your services, advice or work caused a client financial loss through a mistake, negligence or failure to perform.

Technology errors and omissions (Tech E&O)

E&O written for software, SaaS and IT companies. Responds to claims that your product or service failed, such as a bug, outage or integration error, and caused a customer financial loss. Often packaged with cyber liability.

Cyber liability insurance

Can include first-party and third-party coverage for specified privacy, network security and cyber events. First-party coverage can pay your own costs, such as breach response, data restoration and business interruption. Third-party coverage can respond to claims from others affected by an incident. Some policies also address non-malicious system failures or dependent-provider outages. Available protections, triggers, waiting periods and exclusions vary.

Commercial general liability (CGL)

Covers third-party bodily injury, property damage, and personal and advertising injury arising from your operations or premises. It generally doesn't cover professional errors or cyber incidents.

Employment practices liability insurance (EPLI)

Covers claims from employees or applicants alleging discrimination, harassment, wrongful termination, retaliation and similar employment issues.

Fiduciary liability insurance

Covers claims that the people managing a company's employee benefit plans, such as a 401(k) or health plan, breached their duties to plan participants.

Management liability package

A combined policy that typically bundles D&O, EPLI and fiduciary liability, and sometimes crime coverage. Check whether the parts share one limit or have separate limits.

Umbrella and excess liability

Policies that provide additional limits above specified underlying insurance. An umbrella may also cover some exposures not covered by the underlying policies, subject to its own terms and any self-insured retention. Excess coverage may follow specified underlying terms or use its own wording. Neither should be assumed to match the underlying coverage automatically.

Workers' compensation and employer's liability

Workers' compensation pays benefits to employees injured on the job, as required by state law. Employer's liability covers lawsuits from employees related to workplace injuries that fall outside workers' compensation.

Property and business interruption

Commercial property insurance

Covers physical loss or damage to buildings, equipment, inventory and other business property from covered causes such as fire or storm.

Replacement cost

A valuation method that pays to repair or replace damaged property with new property of like kind and quality, without a deduction for depreciation.

Actual cash value

A valuation method that pays replacement cost minus depreciation. It usually pays less than replacement cost for older property.

Business interruption (business income) insurance

Covers lost income and continuing expenses while operations are suspended because of covered physical damage. Policies measure the loss in different ways, such as business income, gross earnings or gross profit.

Period of restoration

The policy-defined period used to measure eligible business interruption loss after a covered event. It commonly reflects the time reasonably required to repair, rebuild or replace damaged property. Its starting point, ending point and treatment of delays depend on the policy.

Extended period of indemnity

Additional business interruption coverage that continues for a set time after operations resume, while revenue recovers.

Waiting period

A time deductible on business interruption coverage: the policy pays only after an interruption has lasted a set number of hours or days.

Extra expense

Covers reasonable additional costs to avoid or reduce an interruption, such as renting temporary equipment or moving to a temporary location.

Contingent business interruption (CBI)

Covers lost income when covered damage at a supplier's, customer's or other dependent business's property disrupts your operations. Usually requires physical damage at the dependent property and is often sublimited.

Equipment breakdown insurance

Covers sudden mechanical or electrical breakdown of equipment, such as electrical panels, HVAC systems and servers, which standard property policies often exclude.

Inland marine insurance

Covers property that moves or is located away from your premises, such as equipment in transit or laptops used by remote staff.

Contract and certificate terms

Certificate of insurance (COI)

A document that summarizes your coverage, such as insurers, policy numbers, dates and limits, as evidence of insurance. It doesn't change the policy or create coverage on its own. See Certificate of Insurance: Why Every Startup Needs One‍

Certificate holder

The person or company a certificate of insurance is issued to, often a customer or landlord. Being a certificate holder doesn't by itself give any rights under the policy.

Additional insured

A person or company added to your liability policy by endorsement, so it can seek defense and indemnity for claims within the endorsement's scope, often those arising from your operations. Additional insureds generally share your policy limits.

Waiver of subrogation

An agreement that your insurer won't try to recover a paid claim from another party, such as a landlord or customer. Your policy must allow it, sometimes by endorsement, before you agree to it in a contract.

Subrogation

An insurer's right, after paying a claim, to pursue whoever caused the loss to recover what it paid.

Primary and non-contributory

An insurance provision under which your policy responds first to a covered claim involving another insured party and doesn't seek contribution from that party's applicable insurance, within the provision's scope. A contract may require this treatment, but the policy wording or endorsement must support it.

Indemnification clause

A contract term in which one party agrees to cover another party's losses or legal costs in certain situations. Insurance may or may not cover what you've agreed to.

Limitation of liability

A contract term that caps how much one party can owe the other, often tied to fees paid. Common in software, SaaS and hosting agreements.

Contractual liability

Liability you take on by agreeing to it in a contract. Some policies cover certain contractual liability; others exclude liability you wouldn't have had without the contract.

Claims, exclusions and policy structure

Claim

A demand for money or other relief, a lawsuit or, in some policies, a regulatory proceeding or investigation. Each policy defines "claim" in its own way, which affects when coverage starts.

Notice of claim

The requirement to tell your insurer about a claim, or sometimes a potential claim, within a set time. Late notice can put coverage at risk, especially on claims-made policies.

Defense costs

Legal fees and expenses to defend a claim. In many liability policies, such as D&O and E&O, defense costs reduce the available limit; in others, such as most CGL policies, they're paid in addition to the limit.

Exclusion

A policy provision that removes certain situations, causes or types of loss from coverage.

Endorsement

A written change to a policy that adds, removes or modifies coverage, such as adding an additional insured.

Sublimit

A lower limit that applies to a specific type of loss within a policy's overall limit, such as a cyber or contingent business interruption sublimit.

Insured vs. insured exclusion

A D&O exclusion for claims brought by one insured against another, such as the company suing its own director. It usually has exceptions, such as for certain whistleblower or derivative claims.

Prior and pending litigation exclusion

Excludes claims arising from lawsuits or proceedings that existed before a set date. Important to check when switching insurers.

Coinsurance

A property policy condition that can reduce a claim payment if you insured property for less than a required percentage of its value.

Insurance-to-value

How closely your insured values match the actual value of what's insured. Understated values can lead to underinsurance and reduced claim payments.

Parametric insurance

Coverage that pays a predetermined amount when a measurable event occurs, such as a cloud outage lasting longer than a set time, instead of paying based on a measured loss.

How insurance is bought

Insurance broker

A licensed professional who represents the buyer, compares options from multiple insurers and helps place coverage. An independent broker can work with many insurers rather than one.

Insurance agent

A licensed professional who sells insurance on behalf of one or more insurers. A captive agent represents a single insurer.

Carrier (insurer)

The insurance company that issues the policy and pays covered claims.

Managing general agent (MGA)

A specialist firm authorized by insurers to underwrite and issue policies on their behalf, often in niche or specialty lines.

Underwriter

The person at the insurer, or MGA, who evaluates a risk and decides whether to offer coverage and on what terms.

Application

The form, with supporting documents, that gives an insurer the information it needs to underwrite you. Answer it accurately; misstatements can affect coverage later.

Quote

An insurer's offer of coverage at a stated price and terms, usually valid for a limited time and subject to conditions.

Binder

A temporary confirmation that coverage is in force until the full policy is issued.

Admitted insurer

An insurer licensed by a state's insurance department, whose rates and forms are typically filed with the state. Policyholders usually have access to the state guaranty fund if the insurer fails.

Surplus lines (non-admitted) insurer

An insurer not licensed in the state but allowed to write coverage, often for specialized or hard-to-place risks. Rates and forms are more flexible, and state guaranty fund protection generally doesn't apply.

Captive insurance company

An insurer owned by the business or businesses it insures, used by some larger companies to retain and manage their own risk.

Frequently asked questions

What's the difference between a deductible and a retention?

Both allocate part of a covered loss to the insured, but they can differ in claims handling, defense obligations, payment timing and treatment of limits. Under a liability deductible, the insurer may handle the claim and recover the deductible from you. Under a self-insured retention, you may need to fund or handle covered costs before the insurer's obligations attach. The wording controls.

What's the difference between claims-made and occurrence coverage?

Claims-made coverage generally depends on when a claim is first made and when it's reported, subject to any applicable retroactive date and other conditions. Occurrence coverage generally depends on when covered injury or damage happens, even if the claim is made later. Both remain subject to the policy's wording and exclusions.

What's the difference between an additional insured and a certificate holder?

An additional insured has rights under your policy, granted by endorsement. A certificate holder just receives a certificate of insurance and doesn't gain policy rights from that alone.

What's the difference between a broker and an agent?

A broker generally represents the buyer and compares options across insurers. An agent sells on behalf of one or more insurers. Both must be licensed.

What is an aggregate limit?

The most a policy will pay for all covered claims during the policy period combined, as opposed to the per-claim or per-occurrence limit.

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Talk to a Fullsteam advisor

Have a term in a contract or quote you're not sure about? Talk to a Fullsteam advisor

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This glossary is general information, not insurance, legal or financial advice. Definitions vary by insurer, policy form and jurisdiction, and your policy's wording controls.

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