Insurance policies have their own language, and endorsements are one example. Endorsements are use to modify your insurance policy from a “standard” policy to something more tailored to your situation.
What is an Endorsement?
An endorsement can be an exclusion, extension, or any other type of modification to the actual terms of your insurance policy in the insurance business.
What is an Insurance Endorsement?
Insurance endorsements entitle your insurance carrier to alter basic policies. Endorsements are used to include certain things, exclude other things, or to modify your insurance policies. Endorsements can also refine language or alter administrative aspects like contact numbers, addresses, or emails.
How does An Insurance Endorsement Work?
An endorsement generally serves one or more of the following purposes:
Excluding Coverage: Many endorsements serve as subtractions, excluding coverage for distinct types of claims. An example might be an endorsement to a general liability policy that eliminates bodily injury or property damage from any asbestos exposure. This endorsement removes a specific coverage that the insurance company does not want to cover.
Adding Coverage: Endorsements are often used to include coverage not given by the standard policy. For instance, voluntary compensation endorsement can consist of a basic workers compensation policy. This endorsement may be added for an additional premium. This endorsement adds workers’ compensation advantages to employees who would not otherwise be covered by state workers’ compensation rules.
Modifying Coverage: Some endorsements revise the capacity of coverage instead of subtracting or adding it. For instance, you may include a clause in a commercial property policy that contains a blanket limit. When this section is incorporated, the amount you obtain for a loss at a single locale may be less than the blanket limit, but the blanket limit might apply to all your locations.
Editorial Modifications: Some endorsements clarify the purpose of a policy without modifying the coverage. For instance, an insurer mistakenly excludes a word in a newly-published policy form. The insurer can fix the omission in an endorsement that includes the missing word.
Administrative Modifications: You may include endorsements for administrative purposes, such as altering the insurer’s contact number or the policyholder’s name and address.
Types Of Insurance Endorsements
Standard Or Non-Standard Endorsements
Many endorsements in the insurance industry are standardized. Standard endorsements are formulated and publicized by insurance advisory groups such as the Insurance Services Office (ISO) or the American Association of Insurance Services (AAIS). Standard endorsements refer to ordinary things individuals often alter their insurance policy, such as modifying address or extra coverage for sewer backups. These endorsements are like templates for updating your policy.
Insurers can utilize these endorsements if they have bought a subscription from the publisher. Standard endorsements are primarily used in the marketplace. Courts have assessed many of these endorsements, so insurers can expect how they are likely to be interpreted in future litigation. For this reason, standard endorsements may be at lower risk for insurers than endorsements they have formulated on their own.
Insurers also prepare non-standard endorsements. An insurer may formulate an endorsement to accomplish a goal for which no standard endorsement is accessible. Insurers also prepare endorsements to earn a competitive advantage. For example, many insurers offer a “broadening” endorsement that combine general liability and a commercial auto policy.
Mandatory or Voluntary Endorsements
Some insurance endorsements are included in a policy willingly, at the choice of the insured or the insurer. Voluntary endorsements are the most common categories of endorsements you will find. For instance, liquor liability endorsement can be added to a general liability policy at the policyholder’s recommendation. Liquor liability coverage ensures businesses from any incidents that stem from alcohol use, such as at a company party.
The insurer might elect other endorsements. For example, a carrier might link an asbestos removal to a policyholder’s liability policy to prevent spending on asbestos-related claims.
Some endorsements are directed by state regulation. For example, many states have formulated an endorsement that revises the cancellation condition found in a standard common liability policy. This endorsement may constrain the insurer’s right to terminate a policy. It may expect the insurer to notify the insured 45 or 60 days before a pending revocation instead of 30 days as asserted in the standard procedure.
Some endorsements are mandated by ISO regulations rather than state law. ISO’s underwriting rules may need a special endorsement on all policies rendering a specific type of coverage. For example, ISO rules include a nuclear energy liability exclusion to all general liability policies. This endorsement removes coverage for damages from a nuclear incident.
Other endorsements are required on policies covering particular types of operations. If an architectural company is signed under a general liability policy, the policy must include a professional liability exclusion. The corporation must negotiate a separate professional liability policy if it needs that coverage.
What Do Insurance Endorsements Cover?
Insurance endorsements can comprise a vast range of circumstances. For instance, if a couple plans to get divorced, one partner may ask for an endorsement to exclude an ex-spouse from home or auto insurance policies. The partner will obtain new documents reflecting the appropriate owner.
A popular example with homeowner’s insurance contains endorsements for particular items. Valuable things like art and jewelry may be worth more than the coverage limits in a standard policy, so these commodities may have endorsements that better indicate their value. These modifications will also expand your policy premiums.
Endorsements can also exclude or limit coverage. For instance, a homeowner’s insurance policy may have an endorsement omitting certain types of water loss to your property. You could also enhance your deductible and obtain an endorsement indicating the change. Your deductible is the amount you pay for covered losses before your policy begins coverage.
Do You Need an Insurance Endorsement?
If you possess items of value or you have recently shifted your home or business address, you may require an insurance endorsement. It is always a good idea to review your insurance policies yearly and ensure they serve your current requirements. An experienced insurance agent can help you evaluate whether you require an endorsement or a different kind of policy.
There are plenty of insurance endorsements that could end up on your insurance policy, without even accounting for tailor-made endorsements that insurance carriers write for a particular consumer.
You should know the purpose of each endorsement on your policy to understand the parameters of the insurance coverage you shop for.