Insurance endorsements, sometimes called insurance riders, are legally binding amendments that change the coverage provided in a policy. They can broaden, restrict, or otherwise alter coverage and usually be added at any point during the policy term. Getting an endorsement allows policyholders to customize their insurance for a small added cost.
How Insurance Endorsements Work
Many insurance policies are written on standardized forms that cover the most common risks policyholders face. When policyholders need something different from the standard coverage, they can have their policies endorsed, or altered. An insurance endorsement is a form that explains the coverage changes you and your insurer have agreed to. These changes include:
- Adding coverage: Adding coverage, such as endorsing hired and nonowned auto insurance to a general liability policy, is one of the most common reasons policyholders request endorsements.
- Restricting coverage: Insurers sometimes endorse policies to eliminate coverage for specific events. For instance, many carriers add an endorsement so that they don’t have to cover bodily injury or property damage caused by asbestos.
- Naming additional insureds: An additional insured endorsement extends some coverage provided in a policy to people who weren’t included originally. Business owners often get these endorsements when a company they’ve contracted with requests it.
- Clarifying policy language: A grammatical error or omitted word can impact the meaning of an insurance contract, so insurers may use an endorsement to make sure the policy’s intent is clear.
- Changing coverage limits: Policyholders can request higher or lower limits and sublimits to protect their assets better. On some policies, they can also ask for adjustments to their deductibles.
- Updating policyholder information: Endorsements are sometimes necessary to change information about the insured, such as her mailing address.
The majority of insurance endorsements are voluntary, meaning either your or your insurer opted for the change. For example, you may want to extend your liability coverage to a client, so you get an additional insured endorsement. On the other hand, your insurer may choose to limit its liability on a policy by restricting coverage, like excluding damage from hailstorms on a property policy.
Endorsements can also be mandatory. Most of the time, this is because the standard policy form does not conform to state law like when a policy’s cancellation clause does not provide the same amount of notice that the state requires. In that case, an endorsement to extend the notification period is mandatory.
Common Insurance Endorsements
Anyone whose insurance needs don’t fit the standard coverage forms or whose needs change while a policy is in force may need an endorsement. This includes business owners as well as individuals who have purchased homeowners’ or life insurance policies. Below are some of the more common insurance endorsements for each category.
Small Business Insurance Endorsements
Small business owners typically use endorsements to cover gaps or increase coverage to make sure they’re protected properly. In some cases, the endorsements listed below can be purchased as standalone policies. That’s more common when a business owner has significant risk and needs more coverage.
- Inland marine: Extends coverage to business property when it’s stored at a site other than the address listed on the policy or while it’s in transit
- Equipment breakdown: Pays to repair or replace business equipment damaged by internal malfunctions
- Business interruption: Covers lost revenues and some operational expenses if you have to pause business operations halt due to a covered claim; most small business owners get this coverage in a business owner’s policy (BOP)
- Communicable disease rider: Adds business interruption coverage for losses caused by infectious diseases
- Additional insured: Extends liability coverage to people not named in the policy originally; businesses often request additional insured status when they contract with other companies
- Additional covered property: Changes a commercial property policy so that it covers property that originally was excluded from coverage
Most of the examples listed above broadens coverage to items and situations not included in a policy originally. Remember, however, that endorsements can also be used to increase limits, restrict coverage, and change deductibles.
Home Insurance Endorsements
Like small business owners, homeowners use riders to increase their coverage when a standard policy is insufficient, like when they need higher limits for valuable property. Some may also need to endorse their liability coverage because of unique activities like running a business out of their homes. Common homeowner’s insurance endorsements include:
- Scheduled personal property: Home policies typically have a set limit for damaged personal property, and it may not be enough for big-ticket items like jewelry and art. A scheduled personal property endorsement allows you to insure specific items for their full value.
- Home-based business: Business activities usually are excluded from homeowner’s insurance, but you can often get coverage by adding an endorsement.
- Water backup and sump overflow: Coverage for water damage is a tricky thing in homeowner’s insurance. Most policies don’t pay for damages caused by public utilities, so many homeowners opt for this endorsement.
- Animal liability: Some insurers don’t cover injuries and property damage your pet causes to other people while others exclude coverage for certain breeds or animals with a history of misbehaving.
Life Insurance Riders
Many of the riders that life insurance carriers offer impact how and when their policies’ death benefits pay out. Some of them can be particularly helpful if the insured’s situation changes during the life of the policy, especially if they face medical hardships. Others increase the benefit for certain situations.
Some of the most common life insurance riders include:
- Waiver of premium: Waives required premium payments if the insured can’t work because of a disability
- Long-term care: Provides monthly payments if the insured require long-term care required
- Accelerated death benefit: Gives the insured access to the death benefit if he is diagnosed with a terminal disease
- Accidental death benefit: Pays an additional death benefit if the insured suffers a fatal accident
- Guaranteed insurability: Allows the insured to buy additional coverage without going through another medical exam
- Term conversion: Allows the insured to convert a term life policy into permanent insurance at designated policy milestones
How to Get an Insurance Endorsement
Getting an insurance endorsement is as simple as identifying your risk, discussing your options with your agent, and paying any additional fee. Typically, endorsements are purchased at the start of a policy, but you can also add them midterm or at renewal if your coverage needs change.
Because they become part of your legal contract with your insurer, endorsements typically remain in force for the length of your policy. However, you can get an endorsement that only alters your coverage for a limited time, such as extending coverage to a second location temporarily.
3 Tips for Getting Insurance Riders
Sometimes, people add riders because they’re inexpensive and sound like a good deal. However, buying coverage you don’t need is a waste. Before you add a bunch of insurance riders and premium to your insurance policies, take the time to review these three tips so that you get coverage appropriate for your situation.
1. Consider Your Risks
Situations that aren’t covered by a standard policy are usually less common than the ones that are. Look at what the rider covers, decide if it applies to you, and whether it’s worth the extra cost. An endorsement can make a policy more valuable, but only if it covers a risk you face, and the expense doesn’t outweigh the peace of mind it brings.
2. Ask What Your Other Policies Cover
If you have multiple policies, you want to find out what each covers so you can avoid overlaps. For example, some insurers automatically include inland marine coverage in their property policies for certain professions like DJs. If that’s the case for you, then you don’t want to add a similar endorsement to your commercial auto insurance.
3. Learn About Time Frames and Qualifications
Some endorsements, especially those for life insurance policies, not only require you to purchase them in a timely fashion but may also have difficult hoops to jump through to get them. Business and home policies often allow you to add endorsements any time prior to a claim.
Bottom Line
No insurance policy can cover every possible loss scenario, but insurance endorsements can help cover situations that your business or home may have an increased risk for. Review what standard insurance forms cover and seek out only the insurance riders that meet your risk needs. In most cases, you can get the added coverage for pennies on the dollar compared to more expensive policies.
