Common Insurance Terms Explained
By Iris Turner, Commercial Lines Agent
As a commercial lines agent, I work with insurance everyday. I understand that if you’re not in the insurance industry, there are a lot of words and phrases surrounding insurance that you might hear while working with your own agent. Sometimes, it can seem like they’re speaking a different language.
As with any product or service you buy or are considering buying, it’s important to know what you’re dealing with in insurance. Grasping the language that insurance agents use is an important part of that process. So, here are some commonly used insurance terms briefly explained.
Named Insured: The named insured is usually an individual or company that is the policyholder, and with whom a contract has been made for their interests to be protected by the policy.
In some cases, an insurance policy may also include additional (named) insureds, such as spouses or business partners, who are also covered by the policy. This can be important in situations where multiple parties have a stake in the insured property or liability.
The named insured is typically the primary point of contact with the insurance company and is responsible for reporting any claims or incidents that may trigger coverage under the policy. They can also make changes to the policy, like adding or removing coverage or adjusting policy limits.
Certificate of Insurance: A certificate of insurance is a form that can be electronic or paper and is proof that a policy is in place.
The certificate of insurance typically includes information about the insurance policy, like the name of the insurance company, policy number, type of coverage provided, and policy limits. It may also include information about the named insured, such as their name and address.
It is important to note that a certificate of insurance does not provide any additional coverage beyond what is provided by the insurance policy itself, and it does not guarantee that a claim will be paid. It simply provides proof that insurance coverage is in place at the time the certificate is issued.
The certificate of insurance is commonly used to provide proof of insurance coverage to third parties, like contractors, who require evidence of insurance coverage before entering into a business transaction or agreement. For example, a contractor may be required to provide a certificate of insurance to a client before beginning work on a project to demonstrate that they have adequate liability insurance in case of damage or injury.
Additional Insured: An additional insured is a person or entity that is added to an insurance policy by the named insured (see above), typically to provide them with coverage under the policy. When someone is named as an additional insured, they get the same protection and benefits as the original policyholder.
For example, in our contractor example, a property owner may require the contractor to add them as an additional insured on the contractor’s liability insurance policy to protect the owner against any claims that may arise from the contractor’s work.
The terms and conditions of coverage for additional insureds may vary depending on the insurance policy and the specific agreement between the policyholder and the additional insured.
I hope this brief explanation has been helpful! If you have any additional questions or would like to speak with us about your insurance needs, please get in touch with us here.