Plain-English definitions
Insurance glossary
46 terms that decide how a policy responds, written the way we explain them to clients. If a phrase in one of our guides is unclear, it is probably defined here.
Full definition pages
The terms people ask about most, each with its own page covering what it includes, what it excludes, and who needs it.
What is EPLI?What is a claims-made policy?What is an occurrence policy?What is an additional insured?What is a deductible vs. self-insured retention?What is a certificate of insurance?What is a waiver of subrogation?What is a prior acts date?What is an extended reporting period?What is a tail policy?What is a retroactive date?What is a BOP (business owners policy)?What is tech E&O insurance?What is cyber liability insurance?What is professional liability (E&O)?What is product liability insurance?What is workers' compensation insurance?
Policy structure and mechanics
The words that decide when a policy responds, how much it pays, and what it will not pay.
- Claims-made policy
- A policy that responds to claims reported during the policy period, subject to a retroactive date, rather than to when the work was performed. Professional liability, tech E&O, and cyber coverage are almost always written this way.Read the full definitionHow claims-made and tail coverage work
- Occurrence policy
- A policy that responds to an event that happened during the policy period, no matter when the claim is later reported. General liability and most property coverage are occurrence based.Read the full definition
- Retroactive date
- The earliest date of work a claims-made policy will cover. Work performed before that date is excluded, which is why moving carriers without prior acts coverage can leave old projects uninsured.Read the full definitionPrior acts and tail policy guide
- Prior acts coverage
- Coverage for work you performed before the current policy began, offered when the new policy carries a retroactive date that reaches back in time. Also called nose coverage when bought from a new carrier.
- Prior acts date
- The earliest date of professional work a claims-made policy will cover, also called the retroactive date. Carrying it forward when you change carriers is what keeps work performed under the earlier policy insured.Read the full definition
- Extended reporting period (ERP)
- Extra time after a claims-made policy ends in which claims for earlier work can still be reported. It is the formal name for tail coverage and does not extend the policy period or raise limits.Read the full definition
- Tail coverage (extended reporting period)
- An endorsement that lets a claims-made policy respond to claims reported after the policy ends. It extends the reporting window, not the policy period, and may be free or paid depending on the carrier and the reason the policy ended.Read the full definition
- Per-claim and aggregate limits
- The per-claim limit is the most one claim can pay; the aggregate is the most the policy will pay across all claims in a policy period. A $1M/$3M policy means $1 million per claim and $3 million total.
- Defense costs inside the limit
- When attorney fees and expert costs reduce the amount available to pay a settlement. Most professional liability forms work this way, so the practical protection is lower than the stated limit.
- Deductible vs. self-insured retention
- A deductible is the amount you pay on each claim before the policy responds. A self-insured retention works similarly but usually also gives you control over the defense and requires you to handle the claim until the retention is exhausted.Read the full definition
- Certificate of insurance (COI)
- A one-page summary proving coverage is in force, showing the carrier, policy dates, and limits. Clients, lenders, and landlords ask for one before work starts, and a COI does not change the policy terms.Read the full definition
- Additional insured
- A person or company added to your policy so they receive protection under it, usually for claims arising from your work. The endorsement wording decides how broad that protection is.Read the full definition
- Endorsement
- A written amendment that changes the base policy by adding, removing, or restricting coverage. Most coverage disputes turn on endorsement wording rather than the main form.
- Exclusion
- A specific loss the policy will not pay, such as employment claims under general liability or AI-related services under some tech forms. Read the exclusions first when comparing quotes.
- Waiver of subrogation
- Policy wording that gives up the carrier's right to pursue another party for a loss it paid. It must be granted by endorsement, and contracts often require it alongside additional insured status.Read the full definition
- Claims history / loss runs
- A carrier-issued report of claims and incidents on prior policies, usually covering three to five years. Underwriters price renewal and new business largely from this document.
- Surplus lines carrier
- An insurer that writes risks standard carriers decline, without state rate approval. Surplus lines policies are legal and common for specialty exposures, but the state guaranty fund protection differs.
- Underwriting
- The carrier's review of your application, revenue, services, and claims history before quoting or binding. Anything described as subject to underwriting is not a final price.
Professional liability and E&O
Coverage for claims that your advice, judgment, or professional service caused a client a financial loss.
- Professional liability insurance
- Coverage for allegations that your professional services were negligent, late, or failed to deliver what was promised. It responds to financial loss claims rather than to bodily injury or property damage.Read the full definitionProfessional liability overview
- Errors and omissions (E&O)
- Another name for professional liability, used most often for technology firms, insurance agents, real estate professionals, and consultants. The name reflects the two things clients usually allege: a mistake or a missed step.What is professional liability (E&O)?
- Malpractice insurance
- Professional liability for licensed professionals such as attorneys, dentists, physicians, and CPAs. The term is interchangeable with professional liability, but the policy forms differ by profession.
- Standard of care
- The level of skill and judgment a reasonable professional in the same field would apply. Claims are generally evaluated against this standard, with expert testimony on both sides.
- Negligent advice
- An allegation that a professional gave incorrect or incomplete guidance that a client relied on and lost money because of. Documentation of what was advised, and when, is the core of the defense.
- Technology E&O
- Professional liability written for software, SaaS, IT services, and AI work. It responds to claims about failed deliverables, outages, data loss, and systems that did not perform as promised.Read the full definitionTech E&O insurance guide
- Silent AI exposure
- A policy that neither clearly covers nor clearly excludes AI-related services, so coverage is decided after a claim. Ask for the AI wording in writing before renewing.AI exclusions in tech E&O
Commercial and business coverage
The policies that protect a business's premises, people, and third-party liability.
- General liability (GL)
- Coverage for third-party bodily injury and property damage claims, such as a client slipping in your office. It excludes professional services and product-related injury.BOP vs. general liability
- Business owners policy (BOP)
- A package that combines general liability with business property and business income coverage in one policy, usually at a lower price than buying each separately.Read the full definitionGet a BOP and GL quote
- Business income coverage
- Pays lost income and continuing expenses while a covered property loss keeps the business closed. It typically responds after a waiting period of a day or two.
- Product liability
- Coverage for claims that a product you made, sold, or distributed caused bodily injury or property damage. Manufacturers, distributors, and sellers can each be named in the same claim.Read the full definitionSupplement and product liability
- Products-completed operations
- The part of a liability policy that responds to injury or damage caused by your product or completed work away from your premises, often with its own aggregate limit.
- Workers compensation
- Coverage required for most employers that pays medical costs and wage replacement for work-related injuries, regardless of fault. It also provides employer's liability protection.Read the full definition
- Certificate-based payroll audit
- The end-of-term review where the carrier compares estimated payroll or revenue with the actual figure and adjusts premium. Understating exposure at application leads to a balance due.
- Umbrella and excess liability
- Coverage that sits above underlying general liability or auto limits and responds when those limits are exhausted. An umbrella can also drop down for some exposures the underlying policy does not cover.
Cyber and employment coverage
Two exposures that general liability leaves out: data events and claims from people who work for you.
- Cyber liability
- Coverage for breach response, ransomware, network interruption, and third-party privacy or regulatory claims. It responds to data and network events rather than to failed professional services.Read the full definitionCyber liability guide
- First-party vs. third-party cyber coverage
- First-party pays your own costs, such as notification, forensics, and business interruption. Third-party pays defense and settlements when others sue you over a breach.
- Employment practices liability (EPLI)
- Coverage for harassment, discrimination, wrongful termination, and retaliation claims brought by employees. General liability excludes these claims.Read the full definitionEPLI guide
- Third-party EPLI
- An extension that responds to employment-related claims from customers, vendors, or applicants rather than employees. It is usually added by endorsement.
- Ransomware
- Malware that encrypts systems and demands payment to restore access. Modern cyber forms address ransom payments, restoration costs, and often require pre-approval before paying.
Specialty terms: supplements and peptides
Wording that comes up in dietary supplement and research-use-only peptide programs.
- cGMP (current good manufacturing practice)
- The FDA manufacturing standards dietary supplement facilities must follow. Underwriters ask for evidence of cGMP compliance before quoting a supplement risk.cGMP and labeling controls in underwriting
- Certificate of analysis (COA)
- A lab report showing the identity, purity, and potency of a batch. It is one of the first documents a carrier requests for supplement and peptide submissions.
- Research use only (RUO)
- A label indicating a substance is sold for laboratory research and not for human use. The label signals intent but is not a liability shield, and many standard product liability forms exclude RUO or unapproved substances.Peptide and RUO insurance
- 503A vs. 503B compounding
- 503A pharmacies compound for individual patient prescriptions under state oversight. 503B outsourcing facilities compound in larger batches under FDA oversight, and underwriters review each differently.Compounding pharmacy insurance
- Recall coverage
- Coverage for the cost of withdrawing a product from the market, including notice, shipping, and sometimes lost revenue. It is often a separate policy or sublimit rather than part of product liability.
- Prop 65 (California)
- California's Safe Drinking Water and Toxic Enforcement Act, which requires warnings for exposures to listed chemicals. Labeling and Prop 65 claims are typically defended under product liability or an advertising injury extension, when the form includes it.Label claims and Prop 65 coverage
- Adverse event
- Any undesirable experience associated with the use of a product. A written intake and reporting process is a common underwriting requirement for supplement and peptide programs.Underwriting-ready checklist
Not sure which term applies to your business?
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Professional Resource Insurance Agency, LLC. CA License #0G81238.