A quick glance at common insurance terms.


Insurance Glossary of Terms

Operating a construction business is fraught with challenges; thus, securing the proper insurance is likely the least of your concerns. However, the overly complicated legalese used in policies and confusing insurance jargon make it difficult to understand coverages, let alone choose the ones right for you. Finding the right insurance should be easy and expedient, not headache-inducing.

To help make your insurance experience easier, here are some common insurance terms, as defined by the International Risk Management Institute, that are likely to pop up in your policy.

Actual Cash Value

In the event of property damage (to a building or automobile, for example), the policy includes how the insured property value is determined and the amount the insurer will pay. ACV is commonly calculated in one of three ways: (1) the cost of repairing or replacing the damaged property, less depreciation; (2) the “fair market value” of the damaged property; or (3) applying the “broad evidence rule,” which requires taking into account all relevant evidence of the value of the damaged property, (as defined by the International Risk Management Institute).

Additional Insured

A party other than the insured that is added to the policyholder’s policy. Construction contracts typically require policyholders to extend their liability coverage to third parties.


The total amount of any insurance funds that are available to pay any and all claims made under the policy during the policy period. A typical aggregate limit for a contractor’s General Liability policy is $1 million or $2 million.

Agreed Value

Pays 100% of the stated amount on a property policy for a covered loss as agreed upon between the insured and the insurance company. There is no coinsurance penalty applied in the policy, so the insured doesn’t have to pay a percentage of the loss.

Covers a building under construction or renovation for physical damage that occurs during a specific policy period (3, 6, 9, 12 months). Typically, the policy period for builder’s risk runs no more than 12 months unless an extension is requested by the insured and provided by the insurance company.

Builder’s Risk

Certificate of Insurance (COI)

This document provides evidence to others (typically customers and business partners) that a contractor, for example, has liability insurance. Contractors prior to beginning a job must provide the COI to a client. The certificate will indicate the named insured, policy type, policy number, policy term, limits, and additional insured information.


An insurance claim is a formal request to the insurance company for reimbursement for losses covered under the policy.

Commercial Property Insurance

Protects businesses from financial loss deriving from damage to their buildings and contents caused by a covered cause of loss, such as fire or theft. The policy may also cover lost income or increased expenses caused by property damage. Commercial property insurance policies can be written for specific perils or all perils, also known as open perils or all risks.

Contractors Pollution Liability

Typically covers a contractor’s liabilities to others for property damage, personal injury, and cleanup costs resulting from pollution or contamination caused by the contractor’s work. The terms of coverage will vary, depending on the insurance company and policy.

Contractors Professional Liability

Covers legal liabilities arising from negligent acts, errors, or omissions (typically including a breach of the contractual obligation to exercise reasonable care, skill, and diligence when, for example, undertaking a design/build project) during the course of professional services provided to a client

Declarations Page

Informally known as the “dec page,” this is the front page of a policy which specifies the named insured, address, policy period, location of premises, policy limits, and other key information.


This is the amount the insured will pay in the event of a claim before the policy kicks in to pay for a covered loss.


An endorsement is a form change made to an insurance contract/policy that adds a type of coverage or a specific type of items to be covered. Depending on the type of endorsement, an additional premium may be charged. The agent will request the endorsement, and the policy premium will be adjusted to reflect the change.

General Liability

Covers property damage or personal/advertising injuries to another party allegedly caused by the insured or an employee. The policy will cover reasonable legal defense, including attorneys fees, court costs, and expert witness fees. General liability insurance also covers judgments and settlements (up to the policy limits) as well as the plaintiff’s medical expenses.

Inflation Guard

Automatically adjusts the limits of insurance to keep up with inflation and help maintain adequate limits on a property policy.

Inland Marine

Provides coverage for materials and equipment when transported over land (typically by truck) or temporarily stored at a job site or warehouse. Essentially, the coverage follows the property.


A person or persons covered by an insurance contract, also known as an assured or policyholder. An insured can also be a company or organization.


A limit is the most an insurer will pay for a claim covered by the insurance policy.


A loss is an injury or damage sustained by (or caused by) the insured as a result of an accident or event against which the insurer has agreed to pay to or on behalf of the insured in exchange for a premium.


This is the amount an insured pays for an insurance policy. It can be paid monthly, semiannually, or annually, depending on the type of policy and the terms available.

Replacement Cost Coverage

Covers the amount it takes to replace a property after a loss with new property of “like kind and quality” up to the policy limits.

Umbrella Insurance

 Provides an insured with extra protection to help cover a claim that exceeds the limits of certain liability policies. This policy is critical in protecting against catastrophic liability events.

Workers’ Compensation

Mandatory in nearly every state, workers’ compensation insurance provides medical care and wage benefits to employees who are injured or become ill on the job.

While these terms are general and a great way to better familiarize yourself with your insurance policy, questions likely remain. Contact an agent or review your insurance policy to determine what coverages are best for you and find answers to any other questions you may have.

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J.E.P. Capital, Inc. dba GO BONDS

P.O. Box 277817
Sacramento, CA 95827-7817

ph: 1-844-BONDS-77 (844-266-3777)

CA DOI License #0G80249

AZ DOI License #3001940599

NV DOI License #3795290

OR DFR License #3001957626

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