What Is an Insurance Endorsement?
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All your hard work and savings have allowed you to buy yourself and your loved ones some beautiful, valuable things. Perhaps it’s treasured jewelry or an expensive guitar, or perhaps you’ve built a detached garage. Or maybe you need to trim down your expenses by limiting your insurance coverage on certain items. In either case, what you need is an insurance endorsement.
What is an insurance endorsement, and what does it do for your insurance? What types of endorsements are there? Here's everything you should know about an insurance endorsement.
What Is an Insurance Endorsement?
Unlike politics, an endorsement in insurance doesn’t align you with a particular party or position. Rather, it’s an insurance policy form that serves to either modify or add to the provisions contained within the policy. You might be more familiar with another term that means the same thing: a rider. That might make it easier to understand as well if you think of it as something on top of the normal policy.
You might wonder, "Why are endorsements necessary?" They exist because every policyholder may have different needs. One person might be looking to save money by reducing their coverage while others might have additional properties, a boat, or valuables they want to insure for a higher limit than their normal policy allows. A rider or endorsement allows a policy to be customized to the client.
Insurance endorsements are legally binding amendments to your insurance policy and provide an extra level of peace of mind that you’re covered in a loss.
Types of Insurance Endorsements
There are three overarching types of endorsements or riders you could come across in an insurance policy. They redefine the terms of your policy in different ways.
1. Additional Coverage
Additions to your coverage beyond the normal terms are possible with insurance endorsements, and they’re quite common. When you have something of value you want to insure beyond your normal policy limit, a rider can be added on.
Common types of additional coverages include:
Earthquake endorsement. Since most policies don’t cover damage due to earthquakes, an endorsement is a good idea for coverage in earthquake-prone areas.
Sewer backup endorsement. If sewage backs up into your basement or crawlspace, it isn’t always covered. A rider can be added to protect you whether from a sump pump failure or a backed-up drain.
Scheduled personal property endorsement. You can add extra coverage item by item (a schedule, if you will) that goes beyond your policy's typical limit. This is how you’d insure valuables, expensive electronics, and collectibles.
Home-based business endorsement. Often, home-based businesses aren’t covered by a standard insurance policy. Operating a business from home could even void your current policy. A rider could add protection while avoiding full commercial insurance.
Watercraft endorsement. Boats can be added to home insurance in many cases. This covers your vessel while it’s docked and during use, but this endorsement is normally restricted to small boats, not yachts.
Endorsements can also be items that are excluded from coverage in your insurance policy. In most cases, these are considered standard endorsements (exclusions) because they are common across most policies. Common limitations or exclusions include flood damage, earthquakes, damage due to pests, and acts of war. To know what’s excluded from an insurance policy, it’s important to read the terms and, if need be, purchase a rider.
3. Modifications of Coverage
Modifications of coverage are used to enhance certain areas of your policy to better protect your needs. Let’s look at jewelry as an example. If you’re insured for a relatively standard limit of $1,500 against theft, it isn’t enough to recoup your losses if you’ve had $20,000 worth of jewelry stolen. In this case, you can get an endorsement that ups your limit, but it must be in place before the loss occurs. This is also where you’d add coverage for instruments, electronics, collections, and furs.