An insurance rider, also known as an insurance endorsement, is an optional add-on to an insurance policy that typically adds, deletes, or excludes coverage or in some way changes the terms of the policy.

This article focuses on insurance riders that can be added to home insurance, but you can add riders to other types of insurance, including rental, auto, and life insurance policies.

How do insurance policy riders work?

Your insurance policy is a contract between you and your insurer. Essentially, an insurance rider is an amendment to your existing insurance contract that changes the terms of the original policy. 

When you have specific needs not covered by a standard insurance policy, you can sometimes add a rider to customize your policy for your situation. You can usually get a rider when you purchase your policy or at any time during the policy term. The policy premiums may change based on the changes outlined in the rider.

Riders can be added to home, renters, and auto insurance. Typically, a rider changes the original policy in one of the following ways:

• Add or include coverage that would otherwise be excluded

• Exclude coverage for certain types of claims

• Modify coverage by expanding or changing the scope of the original policy

Benefits of adding an insurance rider

Insurance riders allow policyholders to tailor coverage to their needs. For example, you might need additional personal property coverage for valuable items or flood insurance if you live in an area with a higher risk for flooding.

A rider can provide increased coverage where you need it, typically at a lower cost than buying a separate policy.

The main benefit of an insurance rider is the increased coverage. A rider can add coverage by including risks that are excluded from the original policy or increase coverage amounts on your value personal property. They’re also usually less expensive than buying an additional standalone policy

Common home insurance riders

People often get riders to get coverage for things their policies typically exclude. We’ve listed a few popular types of home insurance riders below.

Flood insurance

Homeowners policies don’t cover flood damage, and that can be a serious exposure for most homeowners. One option is to get a standalone flood insurance policy from the federally backed National Flood Insurance Program (NFIP), but you might also want to look at private insurers. Some offer flood coverage as a rider to your home insurance policy. In some cases, that can result in broader, more affordable flood insurance.

Earthquake insurance

Earthquake insurance protects your home against damage resulting from a sudden movement of earth. This can include cracks in your foundation, walls, roof, or floor, and it can be particularly important for homes in areas with a high frequency of earthquakes.

As with flood insurance, you can buy this as a standalone policy, but some insurance companies offer earthquake coverage as a rider. 

Special personal property coverage

Home insurance does include personal property coverage (Coverage C), but it’s usually written on a named perils basis. Some people prefer broader coverage for their personal belongings, so they get what’s known as a special personal property endorsement. It changes their Coverage C to open perils coverage.

Water backup coverage

A standard homeowners policy typically excludes water damage caused by water backing up from a sewer or overflowing from a sump pump. A water backup and sump pump overflow rider can be added to your homeowners insurance to help pay for damage caused by backed-up sewers, drains, and sump pumps.

Building code coverage

Building code coverage, also known as ordinance and law coverage, helps protect homeowners from unexpected costs if local building codes have changed since their home was built. That way, if their home is damaged and they file a claim, their insurance company helps pay the cost not just to repair the home, but to bring it up to local code.

Business property coverage

Business property coverage is an important rider for people who run businesses out of their homes. Having a home-based business may require you to keep inventory or special equipment at home that may not be covered by a standard homeowners policy.

Identity theft coverage

Identity theft protection helps cover financial losses if you’re the victim of identity theft. Covered expenses can include costs like attorney and tax advisor fees, certified mail costs, and credit report fees.

What insurance riders are commonly scheduled?

In the insurance industry, “schedule” is another way of saying “list.” So when you get a rider that schedules something, it’s creating a list of specific information in your coverage. A scheduled rider might list new coverage amounts, add-ons, or exclusions in your policy.

Two examples of scheduled riders are:

• Roof surfacing payment schedule.  Dwelling insurance is typically written as replacement cost coverage. However, people sometimes need a roof surfacing payment schedule endorsement that changes claim settlements for roof damage caused by wind or hail to a payment schedule based on your roof’s age and surface materials.

• Scheduled personal property endorsement. Homeowners policies often have sublimits that cap the amount of coverage available for high-value items, like jewelry and electronics. A scheduled personal property endorsement increases the limit for these items.

Note: If you’re adding coverage for high-value items, you’ll likely need to provide an appraisal as proof of each item’s value.

How much does it cost to add a policy rider?

There is sometimes an additional cost for some policy riders, and it varies based on the type of rider, the amount of coverage, and your insurance company. Depending on how the rider amends your policy, it can increase, decrease, or have no impact on the cost of your policy.

An endorsement that does something as simple as changing the mortgagee on your policy doesn’t alter your premium. But if you add special personal property coverage, flood insurance, or make any other changes that increase the amount coverage provided by the basic policy, then you can expect your premium to increase.

Likewise, any endorsement that decreases your coverage often lowers your premium.

How to add a home insurance rider to your policy

When you apply for coverage, your insurance agent will typically ask about situations or items that may need additional coverage, like valuable collections or flood risk. This is a good time to discuss any riders you might need to tailor your coverage appropriately. 

However, you can often get add-ons any time during your policy term as well as when you renew.  Simply contact your insurance company representative to discuss your options.

Here are the steps to add a rider to your home insurance policy:

• Call your insurance agent.
• Discuss relevant gaps in coverage and potential add-ons available.
• Have any appraisals or inspections required to add the rider.
• Get a revised quote for coverage.
• Bind your revised coverage with the rider.

Remember, what riders are available can vary by insurance provider. Keep that in mind when you’re shopping for home insurance.