5 minutes on a call with an insurance agent or broker and you can easily feel like you’ve stepped into a parallel world with its very own language. Electing the right insurance policies for your business is enough of a headache without needing to Google insurance lingo while you’re deciding.
So, we at Ashlin Hadden Insurance decided to provide a “cheat sheet” to hopefully acquaint you with the terms you are likely to hear when purchasing insurance coverage for your Amazon business.
Actual Cash Value (ACV)
This is the measurement insurance companies use to calculate how much money needs to be reimbursed to you for property damages/loss. It’s calculated by subtracting depreciation from the replacement cost.
This is a third-party on your insurance policy. If you sell on Amazon, you would add Amazon.com to your policy as the additional insured.
The aggregate limit is the maximum amount your insurer will pay out during your policy period (which is usually a year). Amazon requires that your policy have an aggregate limit of $1M.
Blanket insurance means you can select one limit of insurance that will apply to multiple business properties. You may not need this if you are an eCommerce seller.
An insurance broker is a person or company that is licensed to work with various insurance carriers to find the right policy and company for your business needs.
Business Income Insurance/Business Interruption Insurance
This helps replace your lost income if business operations are stalled due to property damage. It’s pretty unusual that an online seller would need this type of policy.
An insurance carrier is another term for insurance company. Your carrier is the one that provides your insurance.
When an insurance company is deciding a) if they want to insure your business and b) what kind of coverage you’ll need and c) how much your premiums will be, they use codes to classify your type of business based on its risk level. Many eCommerce sellers will complain about their business being misclassified, but that’s because the codes haven’t been updated in recent years to reflect many categories/business types.
Certificate of Liability Insurance
Much like an ACORD, a certificate of liability insurance is proof that you have a general liability insurance policy to protect your business. If you sell on Amazon, you need this form uploaded on your Seller Central account as proof of coverage.
Claims-Made Insurance Policy
This means that your current policy pays for claims that arose from prior incidents even if you had a different insurance company.
The continuity date is the earliest date that a claim can occur and be covered under a claims-made policy. For your first insurance policy, the continuity date is the effective date of the policy.
Declarations Page (Dec Page)
Sheet with policy that summarizes your insurance coverage. You should receive a new declaration page with every renewal period.
The deductible of your commercial insurance policy is the amount you must pay before your insurance will kick-in and start paying.
This is an amendment to an existing insurance policy that changes the terms of that policy. An endorsement can be issued at the time of purchase, mid-term, or at renewal time.
As the name suggests, your business insurance policies will include a list of exclusions that your carrier will not cover. These are very important to understand because you may think you are covered for something that you aren’t and may need to amend or rethink purchasing that particular policy.
The exclusive remedy is part of your workers’ compensation policy which prevents employees from suing your business for a work-related injury or illness if they receive benefits through work.
Extended Reporting Period (ERP)/Tail Coverage
An extended reporting period helps cover claims made against your business after your coverage ends. You can buy ERP after canceling coverage or when an insurer doesn’t renew your policy. It’s very similar to how Cobra works for health insurance.
Excess insurance provides additional financial limits above those covered by the underlying policy. Unlike umbrella policies, excess insurance does not expand the scope of what is covered, but rather provides more financial cushioning. So, if a customer makes a claim against your Amazon business and they are suing for more than your general liability policy covers, having excess coverage could help pay those additional costs.
Fidelity bonds protect your business from losses if one or more employees steals or commits a fraudulent act.
Hold Harmless Agreement
A hold harmless clause is used as a liability release in a contract that protects one party from being sued over injury or property damage by the other party. By signing the clause, the other party is agreeing not to hold business owners legally responsible for the risks involved in certain services. This is often used with contractors.
Business liability means your company is responsible for a loss, damage, injury, or emotional/mental dishevelment
Libel is an inaccurate/false defamatory statement that is made in writing.
A loss payee is a person or party who is paid for a loss – either via a settlement or lawsuit.
A report that shows your company’s claims history.
We get the most questions and confusion regarding this term. When you sell private label on Amazon, you most likely hire a manufacturing plant to make your product/s. However, in the insurance world, as the owner of these products, you are considered the manufacturer. More specifically, if your company was to get sued because your product caused harm or damage, you would be the one held responsible for said damages – not your actual manufacturer.
Short for medical payments coverage, this is an add-on to commercial auto policies that covers medical-related expenses in any work-vehicle accident.
Minimum Retained Premium
The minimum earned premium is the lowest amount of money your insurer will accept for an insurance policy.
A named peril is a term used to define a specific type of damage or loss. In order for an insurer to provide coverage on a claim, it must have been caused by a peril that’s listed on the policy.
Nose Coverage/Prior Acts Coverage
This type of coverage helps protect your business from a filed claim that occurred under your old insurance policy.
Occurrence-Based Insurance Policy
An occurrence-based policy covers losses that your business incurred during the time you had the policy – regardless of when the claim was filed. It protects you against long-tail events – incidents that could happen years after your policy was established.
This indicates the maximum amount that your insurer will pay out for one claim. For example, a typical general liability policy for Amazon Sellers has an occurrence of $1M. This means that your insurance company will cover up to $1M in damages for each occurrence. However, if your aggregate is the same amount as your occurrence, what that means is that if one occurrence in that year cost $1M or more, your insurance company will not cover any more claims because you’ve used up the maximum limit of your aggregate as well.
A peril is a circumstance or event that is known to cause loss or damage. Floods, storms, and fires are examples of perils.
Personal and Advertising Injury
This is one of the clauses that general liability insurance covers, meaning your insurance carrier will cover claims for “injuries” sustained through libel, slander, and copywriting infringement.
This is the cost of your insurance policy. Your premium is your annual cost, but can be broken down into monthly payments.
Qualifying events are incidents that are eligible for coverage if they cause a loss. It’s really important to understand what your qualifying events are. Making assumptions as to what events your policy will cover often leads business owners susceptible to gaps in their coverage.
Repetitive Stress Injury
A type of injury that develops over time due to repetitive motions. Employees can receive workers’ compensation benefits if they develop a repetitive stress injury such as carpel tunnel syndrome from typing or a back injury from moving cargo.
This date defines how far back in time a loss can occur to file a claim with your current insurance carrier. If a claim happens before your retroactive date, you will not receive benefits.
Strict liability is when manufacturers, wholesalers, distributors, and retailers are deemed responsible for a claim in which damages were incurred through no particular fault or negligence of anyone. Strict liability is often assigned in lawsuits where a defective product has hurt someone or damaged their property.
Subrogation is when your insurance carrier has paid for a claim but then pursues reimbursement for a third-party that’s at fault.
Often used in law, a tort is a wrongful act that causes another person damages or harm.
A person who commits a tort.
Umbrella insurance extends the coverage limits and scope of a policy. It essentially covers gaps in your base insurance plan to add additional layers of protection.
Specific to business insurance, underwriters are the specialists for an insurance company who examine your business’s risk score and determines how much the rate will be/if they are willing to take said business on as a client.
Hopefully, this cheat sheet has clarified some insurance jargon you weren’t familiar with before. For additional questions about business insurance policies and what they do/how they operate, you can check out our FAQ videos here.
Lastly, if you still have more questions, do not hesitate to reach out to us at email@example.com.