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Insurance Terms Glossary

July 12, 2002
URL: http://www.entrepreneur.com/article/53370

Bonding: a guarantee of performance required, either by law or consumer demand, for many businesses, most typically general contractors, temporary personnel agencies, janitorial companies and businesses with government contracts

Broker: an insurance agent who represents many different insurance companies

Business interruption insurance: pays for the cost of repairing or rebuilding business as well as income lost while business is out of commission

Direct writer: an insurance agent who represents one insurance company; see also Broker

Disability insurance: pays a fixed percentage of average earnings should the insured be unable to continue working due to disability

Employment practices liability coverage: an optional part of workers' compensation coverage, this protects the corporation from being sued for acts of individual employees (such as in a sexual harassment case)

Errors and omissions liability coverage: protects professionals, such as consultants or accountants, from damages resulting from an error or omission in their work

General liability coverage: insures the business against accidents and injuries that happen on its premises, as well as exposure to risk related to its products

General liability coverage: insures the business against accidents and injuries that happen on its premises, as well as exposure to risk related to its products

Key person insurance: life insurance policy taken out on "key pee" in the company with the beneficiary being the company; proceeds are used to buy out the deceased's shares or ownership interest in the company

Package policy: insurance policy that combines several standard coverages, such as liability, burglary and vehicle, in one package

Property/casualty coverage: protects physical property and equipment of the business against loss from theft, fire or other perils; all-risk coverage covers against all risks; named-peril coverage covers only against specific perils named in the policy

Replacement cost insurance: covers cost of replacing property at current prices

Umbrella coverage: protects you for payments in excess of your existing coverage or for liabilities not covered in your other policies

Workers' compensation insurance: covers medical and rehabilitation costs and lost wages for employees injured at work; required by law in all states