An insurance endorsement, also known as a rider, is a legally binding modification to an insurance policy. The term “endorsement” is commonly used to refer to policy enhancements, such as those that add extra coverage for your home, personal belongings, or personal liability. However, endorsements can also limit or exclude coverages or otherwise modify a policy.
How does an insurance endorsement work?
Generally, an insurance endorsement modifies your policy, but the exact way it works depends on the type of endorsement, your coverage, and your insurer. Below are common ways an endorsement may modify your policy.
Expand your coverage
Endorsements can increase coverage limits or add protections for risks otherwise excluded from your policy.
For example, the standard homeowners insurance policy typically excludes coverage for water backups or overflows, such as those caused by broken sump pumps. Adding a water backup endorsement could expand coverage to include damage from those events.
Similarly, a guaranteed replacement or extended replacement coverage rider could increase your dwelling coverage limits.
Limit your coverage
Endorsements can exclude or reduce coverage for various reasons, including removing unnecessary coverages or helping homeowners secure coverage for a property that would otherwise be ineligible.
For example, if an insurance company determines that your house's roof is too old to insure, they may use an endorsement to exclude roof damage from the policy. Without the endorsement, policy premiums may be significantly higher or the insurer may refuse to issue a policy.
Similarly, suppose you no longer want or need a specific type of coverage, such as personal property protection. In that case, your insurer may let you sign an endorsement to exclude that coverage from your policy.
Modify your policy
Insurers use endorsements to make other policy modifications, including those that don’t affect coverage levels. For instance, an endorsement may be used to:
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Add or remove people from the policy, such as after a marriage or divorce
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Change your deductible, such as increasing or decreasing it, or specifying a different deductible for specific types of damage, like those caused by wind
Since insurance endorsements modify your policy, some can also affect your premiums. Adding or increasing your coverage may raise your premiums, while removing or excluding it may lower them. Likewise, increasing your deductible can reduce your premiums; lowering your deductible will increase your premiums.
It’s a good idea to read your policy documents to understand the specifics of each rider. Your insurance agent is also a reliable resource if you have any questions or concerns.
Who needs insurance endorsements?
Many policyholders will require or otherwise encounter an endorsement while purchasing or maintaining an insurance policy. Some endorsements may even help homeowners meet mandatory coverage requirements.
For instance, if you live in an area prone to flooding, your insurer may require you to carry flood insurance. Depending on your insurer and policy, you may be able to add a flood insurance endorsement to your policy to meet your lender's requirements. In other cases, endorsements make minor yet essential changes to a policy, such as adding people to the policy.
I you need to make changes to your policy or think you may need an endorsement, contact your insurer to discuss your options.
What home insurance endorsements are available?
The types of home insurance endorsements available depend on your unique situation, where you live, and the insurer you choose.
Below are just some of the most common home insurance endorsements:
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Scheduled personal property. Allows you to secure higher coverage limits for high-value items such as jewelry, collectibles, fine art, or similar belongings.
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Replacement cost for personal property. Personal property claim values are often based on the depreciated value of the damaged or stolen property. This endorsement enhances coverage so your claim payout reflects the current market value of the item in question.
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Water backup coverage. Protects against damage caused by water backup or overflow, typically resulting from failed sump pumps or overwhelmed sewer systems.
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Inflation guard. Automatically increases your dwelling coverage to account for rising replacement costs due to inflation.
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Identity fraud coverage. Covers legal fees, lost wages, and other costs related to recovering from identity theft.
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Animal liability coverage. Expands your personal liability protection if your pet causes property damage or injuries to others.
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Ordinance or law coverage. Provides additional protection to cover the costs of rebuilding or repairing your home to meet current local ordinances or building codes.
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Flood insurance. Expands your homeowners cover to include damage caused by flooding, such as that resulting from severe storms, flash floods, tidal surges, or similar situations.
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Earthquake insurance. Covers damage caused by earth movement, including earthquakes and landslides.
How do you get a home insurance endorsement?
You can obtain a home insurance endorsement by contacting your insurance agent. The exact process will depend on the type of endorsement you need and your existing policy.
Always consult with your agent about any endorsement questions or policy changes that may require an endorsement. These can include changes to your homeowner profile, such as marital status, and your overall coverage needs, which may be the case if you've recently completed renovations or purchased a high-value item.
You can typically add most endorsements at any time, including when you first purchase your policy, during the term of your policy, or when you renew it. However, there may be exclusions. Always consult with your insurer to determine your eligibility.
How long is an endorsement valid?
In general, endorsements remain valid until the end of your policy's term and are renewed when your policy term renews. However, some endorsements have a limited term. For instance, a vacancy permit endorsement stays in effect while your home is unoccupied during renovations and is removed once the property is no longer vacant.
Speak to an agent to determine if a specific endorsement is limited or if it will remain active as long as your policy is active.