Commercial insurance glossary

Insurance wording can be hard to follow. These are plain-language definitions of the terms Ontario business owners see most often in quotes, contracts and policies. Policy wording always governs, so ask a licensed broker how a term applies to your coverage.

Actual cash value: A way of valuing a property loss that takes depreciation into account, so older items are paid at less than the cost of new ones. It generally pays less than replacement cost. Your policy will state which basis applies to each type of property. Learn more
Additional insured: A person or company added to your policy by endorsement so they have some protection under it, usually for claims arising from your work or your use of their premises. Landlords, general contractors and property managers in Ontario often require this in leases and contracts. The scope depends on the endorsement wording. Learn more
Aggregate limit: The most a policy will pay for all covered claims during the policy period combined. Once the aggregate is used up, the policy may not pay further claims until it renews. Many liability policies have both an aggregate limit and a per occurrence limit. Learn more
Binder: A temporary written confirmation that coverage is in force while the full policy is being prepared. It usually states the main terms, limits and effective date. A binder is replaced by the policy once it is issued.
Broker vs agent: An insurance broker typically works with several insurers and can compare options for you, while an agent often represents one insurer or a limited group. In Ontario, general insurance brokers are licensed by RIBO, and life and health agents are licensed by FSRA. Both must meet their regulator's standards.
Business interruption indemnity period: The length of time a business interruption policy will pay for lost income after an insured property loss. It is chosen when you buy the coverage, so it should reflect how long a realistic rebuild and recovery would take. Once it ends, payments generally stop even if the business has not fully recovered. Learn more
Care, custody or control: A common liability exclusion for damage to property that belongs to others while it is in your care, custody or control. For example, a customer's equipment in your shop may not be covered by general liability. Separate coverage, such as a customer's goods extension, may be available. Learn more
Certificate holder: The person or company a certificate of insurance is issued to as proof that you carry coverage. Being a certificate holder generally does not give that party any coverage under your policy. To extend coverage, they usually need to be added as an additional insured.
Certificate of insurance (COI): A short document, issued by your broker or insurer, that summarizes your coverage, limits and policy dates. It is proof of insurance, not the policy itself, and it cannot add coverage the policy does not provide. Clients, landlords and contractors often ask for one before work starts. Learn more
Claims-made policy: A policy that responds to claims first made against you, and reported, while the policy is in force, subject to any retroactive date. Professional liability and directors and officers policies are often written this way. Keeping continuous coverage matters because a lapse can leave gaps. Learn more
Co-insurance clause: A property insurance condition that requires you to insure your property to a stated proportion of its value. If you are underinsured at the time of a loss, the insurer may reduce the claim payment proportionally. Keeping values up to date helps reduce this risk. Learn more
Commercial general liability (CGL): Insurance that covers claims from third parties for bodily injury and property damage arising from your business premises, operations or products, subject to the policy terms. It is the coverage landlords and clients most often ask for. It generally does not cover professional errors or damage to your own property. Learn more
Completed operations: Liability coverage for injury or damage that arises after your work is finished, such as a leak from plumbing you installed months earlier. It is usually part of a commercial general liability policy and is important for contractors. It may be subject to its own aggregate limit. Learn more
Deductible: The amount you pay toward a covered loss before the insurer pays the rest. A higher deductible usually lowers the premium but increases what you pay when you claim. Some liability policies apply the deductible to defence costs as well as damages, depending on the wording.
Endorsement: A written change to an insurance policy that adds, removes or modifies coverage. Adding an additional insured, a waiver of subrogation or a new location is typically done by endorsement. Endorsements form part of the policy contract.
Errors and omissions (E&O): Another name for professional liability insurance, which covers claims that your advice or services caused a client a financial loss. Some Ontario regulators, such as RECO for real estate registrants, require it as a condition of registration. Many E&O policies are written on a claims-made basis. Learn more
Exclusion: A policy provision that removes certain risks, types of property or situations from coverage. Common examples include intentional acts, wear and tear and, in many liability policies, professional services. Reading the exclusions is as important as reading the coverage grant.
FSRA: The Financial Services Regulatory Authority of Ontario, which regulates insurance and other financial services in the province. It licenses life and health insurance agents and oversees auto insurance rules. Employee benefits and individual life and health referrals from CommercialInsurance.ca go to FSRA licensed advisors.
Group benefits: A benefits plan an employer offers to a group of employees, which may include health, dental, life and disability coverage. Premiums and plan design vary with the group's size and needs. Many insurers offer plans for small businesses with only a few employees. Learn more
Health spending account (HSA): An employer funded account that reimburses employees for eligible health and dental expenses up to a set amount. When set up as a private health services plan that meets Canada Revenue Agency rules, benefits paid are generally not taxable to employees. It is popular with small businesses that want flexible benefits. Learn more
Limit of liability: The maximum amount an insurer will pay under a policy or a coverage part. Contracts and leases often specify a minimum limit you must carry. Amounts above your limit can become your responsibility unless another policy, such as an umbrella, responds. Learn more
Loss runs: A report from an insurer listing the claims made under your policies over a period of time, including amounts paid and reserved. New insurers often ask for loss runs when quoting. Your broker can usually request them from your current or former insurer.
Named insured: The person or business shown on the policy declarations as the policyholder. The named insured usually has the main rights and duties under the policy, such as paying premiums and receiving notices. Your legal business name should match the named insured exactly.
Occurrence policy: A policy that responds to injury or damage that happens during the policy period, even if the claim is made years later. Commercial general liability is commonly written on an occurrence basis. The policy in force when the incident occurred is typically the one that responds. Learn more
Per occurrence limit: The most a policy will pay for all claims arising from a single incident. It works alongside the aggregate limit, which caps the total for the policy period. Clients and landlords often state the per occurrence limit they require. Learn more
Premium audit: A review at or after the end of a policy term to compare estimated figures, such as revenue or payroll, with actual figures. If the actual figures differ, the premium may be adjusted up or down. Audits are common on liability policies rated on revenue or payroll.
Replacement cost: A way of valuing a property loss based on what it costs to repair or replace the property with new property of like kind and quality, without a deduction for depreciation. Policies often require you to actually repair or replace the property to receive the full amount. Conditions depend on the policy wording. Learn more
Retroactive date: A date in a claims-made policy before which work or incidents are not covered. Claims arising from services performed before that date are usually excluded, even if the claim is made during the policy period. Keeping the same retroactive date when you renew or switch insurers helps avoid gaps. Learn more
RIBO: The Registered Insurance Brokers of Ontario, the regulator of general insurance brokers in Ontario. RIBO licenses individual brokers and brokerages and sets professional standards. Business insurance referrals from CommercialInsurance.ca go to RIBO licensed brokers.
Subrogation: The insurer's right, after paying a claim, to pursue the party responsible for the loss to recover what it paid. For example, a property insurer that pays for fire damage may pursue the contractor who caused the fire. Subrogation rights can be limited by contract.
Super visa insurance: Private medical insurance required for parents and grandparents applying for a Canadian super visa. Immigration, Refugees and Citizenship Canada requires it to come from a Canadian insurance company or an approved company outside Canada and to be valid for at least one year from the date of entry. Other minimum requirements apply, so check the current federal rules. Learn more
Umbrella vs excess insurance: Both add liability limits above your primary policies, such as general liability and auto. Excess insurance generally follows the terms of the underlying policy, while an umbrella may also respond to some claims the underlying policy does not cover, subject to its own terms. The wording decides how each one works. Learn more
Waiting period: A set amount of time after a loss or start date before certain benefits begin to pay. Business interruption coverage and disability benefits commonly include one. The length is stated in the policy or plan. Learn more
Waiver of subrogation: An agreement, usually in a lease or contract and supported by a policy endorsement, that limits an insurer's right to recover from another party after paying a claim. Landlords and general contractors often request it. Your broker should confirm that your policy allows it before you sign.
WSIB: The Workplace Safety and Insurance Board, which provides workplace injury insurance for workers in Ontario. Most employers in mandatory industries must register, and WSIB says businesses have 10 calendar days after hiring their first employee to do so. WSIB is separate from private business insurance.
WSIB clearance certificate: A document from WSIB showing that a business, contractor or subcontractor is registered and up to date with WSIB. WSIB says a valid clearance assures the hiring party that WSIB will not hold it liable for the contractor's unpaid premiums during the clearance period. It is separate from a certificate of insurance. Learn more

Commercial insurance glossary

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