Glossary

Insurance terms, defined

The words that appear in your lease, your customer's insurance exhibit and your renewal endorsement, each defined once and tied to what it means for a company that ships hardware or models.

Guides Questions founders ask

AAbsolute AI exclusionAn exclusion that removes any claim arising from, relating to or involving artificial intelligence in any way, with no carve-back for the insured's ordinary use. For a company whose product is a model or a machine, it can leave the policy close to empty.
Additional insuredA person or company added to your policy by endorsement so they can claim under it too, usually a landlord or customer whose contract asks for it. They get a right to defense and payment for claims arising from your work, within the limits of the endorsement.
Admitted insurerAn insurer licensed by a state to write business there, whose rates and forms are filed with that state's regulator. Its policies are backed by the state guaranty fund if the insurer fails.
Affirmative AI coveragePolicy wording or a standalone product that names AI-related losses as covered, instead of leaving them silent or excluding them. It arrives as an endorsement to cyber or E&O, or as a dedicated AI liability policy.
Agentic AIAI systems that take actions on their own toward a goal, such as sending messages, moving money or calling other software, rather than only producing text for a person to act on. Insurers treat them as a distinct exposure.
Aggregate limitThe most a policy will pay for all covered claims in one policy period, however many there are. Once it is used up, the policy pays nothing more until it renews.
Aircraft exclusionThe clause in a standard general liability policy that removes injury or damage arising from owning, operating or entrusting an aircraft. Drones fall inside it unless the policy says otherwise.
Aviation liabilityLiability insurance written on an aviation form for injury and property damage caused by operating aircraft, including drones. It fills the gap the general liability aircraft exclusion leaves.
BBinderA temporary written confirmation from the insurer that coverage is in force on agreed terms while the full policy is being issued. It is enforceable for the period it states.
Bodily injuryPhysical harm, sickness or disease to a person, including death that results. It is one of the two triggers of general liability, with property damage as the other.
Broker of recordThe licensed broker an insurer recognises as representing you on a policy or a submission. A broker of record letter from you moves that authority to a different broker.
Business interruptionCoverage that replaces income lost and extra expenses incurred while covered physical damage is repaired. It is usually part of a property policy, and the physical loss is what triggers it.
CCertificate of insuranceA one-page summary issued by your broker that shows which policies you carry, their limits and dates, and who the certificate holder is. It proves coverage exists and changes nothing about it.
Claims-made and occurrence policiesAn occurrence policy responds to incidents that happen during the policy period, whenever the claim is filed. A claims-made policy responds to claims first made during the policy period, subject to its retroactive date.
Class codeA numeric category an insurer assigns to your business or to each employee role that sets the base rate for the premium. The wrong class can overprice a policy or leave an operation outside what the insurer agreed to cover.
Commercial autoThe policy that covers liability and physical damage for vehicles your business owns, leases or operates on public roads. General liability excludes autos, so a company vehicle needs its own form.
Contractual liabilityLiability you take on by agreeing to it in a contract, most often through an indemnity clause that makes you pay for a customer's losses. Policies respond to some of it and exclude the rest, so the clause and the form have to be read together.
DDeclinationAn insurer's refusal to quote or renew a risk. It records one insurer's appetite on one submission, and other insurers can see the same company differently.
Directors and officers insurance (D&O)Management liability that protects directors, officers and the company when leadership is sued over decisions made running the business. Term sheets often make it a closing condition at the first priced round.
EEmployer's liabilityThe second part of a workers' compensation policy, which covers suits by employees or their families that fall outside the state compensation system. It carries its own limits, often asked for in customer contracts.
EndorsementA page attached to a policy that changes it: it adds coverage, removes it, names a new party, or rewrites a definition. The endorsement controls over the base form wherever the two disagree.
Equipment floaterAn inland marine form that covers listed equipment against physical loss wherever it is located. Contractors and robotics companies use it for machines that work away from their own premises.
ExclusionA clause that removes a type of loss, activity or property from what a policy responds to. Exclusions sit in the base form and in endorsements, and at claim time they decide the outcome more often than the coverage grant does.
FFirst-party and third-party cyber coverageFirst-party cyber pays your own costs after an attack, such as forensics, notification and lost income. Third-party cyber pays claims others bring against you for a breach, such as customers suing over exposed data.
GGeneral liabilityThe policy that responds when your business operations or products injure someone outside the company or damage property you do not own. It is the first line most contracts and leases require.
Generative AI exclusionAn endorsement that removes coverage for claims arising out of generative artificial intelligence. Standard-form versions for general liability, including one for products and completed operations, took effect in January 2026.
Government-use exclusionA clause that removes coverage for products sold to or used by a government or military customer. It is common on product liability forms written for commercial markets.
HHired and non-owned autoLiability coverage for vehicles your business rents or that employees drive for work in their own cars. It is often added to general liability or written on the auto policy for companies that own no vehicles.
Hull coveragePhysical damage insurance on an aircraft itself, including a drone and often its payload and ground equipment. It is the aviation equivalent of equipment coverage.
IIn-orbit insuranceCoverage for loss of or failure of a spacecraft after launch coverage ends, usually renewed year by year. It answers a satellite that stops working or loses capacity in orbit.
Inland marineProperty insurance for equipment that moves: in transit, at job sites, on pilots and demos. For a robotics company it is the line that follows the machines once they leave the building.
ITAR exclusionA policy clause that removes or limits coverage for products, data or services controlled under the International Traffic in Arms Regulations. It appears on liability and property forms written for commercial risk.
LLaunch insuranceCoverage for loss of or damage to a spacecraft from the moment of intentional ignition through a set period after separation or in-orbit testing. It is priced mission by mission.
Limited AI exclusionAn exclusion that removes a defined slice of AI-related claims, such as those arising out of generative AI output, while the rest of the policy keeps responding. The argument at claim time is whether the loss falls inside the slice.
Loss runsReports from your current and past insurers listing every claim, its status and the amounts paid or reserved over recent policy years. Underwriters ask for them when quoting a renewal or a new policy.
MMaximum probable lossThe largest loss reasonably expected from a specific licensed launch or reentry, calculated by the licensing authority. It sets how much third-party liability insurance the license requires.
NNon-owned aviation liabilityLiability coverage for aircraft your business uses but does not own, such as drones flown by contractors or rented for a job. It protects the company when a hired pilot's flight causes harm.
PPart 107The federal rule for commercial operation of small unmanned aircraft under 55 pounds in the United States. It sets pilot certification and operating limits, and it does not require insurance.
Primary and non-contributoryWording that makes your policy pay first for a claim involving an additional insured, without asking the additional insured's own policy to share the loss. Customers and landlords ask for it to keep their own insurance out of claims your work causes.
Product liabilityLegal responsibility for injury or damage caused by a product you designed, made, sold or distributed. In insurance it is answered mainly by the products and completed operations part of general liability.
Products and completed operationsThe part of general liability that covers injury or damage caused by a product after it leaves your hands, or by work after you have finished it. It usually carries its own aggregate limit.
RRetention and deductibleThe amount of a claim you pay yourself. With a deductible the insurer handles the claim and bills you back; with a self-insured retention you pay defense and loss up to the amount before the insurer steps in.
Retroactive dateThe date on a claims-made policy before which a wrongful act is not covered, even if the claim is made during the policy period. Keeping it unchanged across renewals and insurer changes protects past work.
SSide A, B and CThe three insuring agreements in a D&O policy. Side A pays individuals when the company cannot indemnify them, Side B reimburses the company when it does, and Side C covers the company's own liability, usually for securities claims.
Silent AIAI-related risk that a policy neither expressly covers nor expressly excludes, so whether it responds depends on how general wording is read after a loss. The term borrows from silent cyber.
SublimitA smaller cap inside a policy's main limit that applies to one kind of loss. A $3M cyber policy with a $250,000 sublimit for social engineering pays no more than $250,000 for that claim.
Surplus linesThe market of non-admitted insurers that write risks the standard market will not, with freedom to set their own forms and rates. A specially licensed broker places the policy and handles the state taxes and filings.
TTechnology errors and omissions (tech E&O)Professional liability for technology companies: it responds when your product or service fails to perform and a customer suffers a financial loss. It is the anchor line for an AI or software company.
Third-party liability for launch and reentryInsurance that pays for injury and damage a licensed launch or reentry causes to people and property outside the mission. In the United States the licensing authority sets the required amount for each license.
UUmbrella and excess liabilityBoth add limits above your primary liability policies. Excess follows the terms of one underlying policy, while an umbrella can sit over several and sometimes responds to claims the underlying forms leave out.
WWaiver of subrogationAn endorsement in which your insurer gives up its right to recover a paid claim from a party your contract names. Customers ask for it so your insurer cannot pay your loss and then sue them for it.
Workers' compensationThe state-mandated policy that pays medical costs and lost wages for employees injured on the job, in exchange for limiting their right to sue. Most states require it once you have employees.

These entries describe coverage in general terms. They are not an offer of insurance, and carrier appetite, policy wording, licensing, and availability govern every quote and every claim.