What is an insurance endorsement?
Insurance endorsements allow you to change standard property and casualty insurance. It is mainly used for any kind of additions, subtractions, and other updates to your coverage. It can also be used to clarify language or change administrative stuff like address, email or names, etc.
In life and health insurance, an endorsement is known as “Rider”
An endorsement may have its own deductible and limits. It can be added anytime whether the policy is issued, during the policy term, or at the time of renewal of the policy. It may affect your insurance cost depending on the changes made to the policy.
Working of Policy Endorsements
Many endorsements serve as exclusions. Like eliminating coverage for certain types of claims. For example, there is an endorsement added to the Auto Insurance that will exclude any third party damage in case of an accident.
Endorsements are frequently used to append coverage to the basic policy. It is not part of the basic policy. For example, there is an endorsement, which can be added to standard home insurance policy. Which can cover more vehicles or other accessories. In this case, the endorsement is added to add coverage to the basic policy.
Some endorsements modify the extent of insurance policy coverage rather than adding or removing it from the policy. For example, in Auto Insurance there is an endorsement that can increase the coverage of a vehicle. But this also affects the premium of your policy.
Some endorsements clarify the intent of a policy without altering any insurance policy or its coverage. For example, an insurance producer accidentally omits a word in a newly-published policy form. The insurer can correct the error in an endorsement that adds the missing word in it.
Endorsements may be added for administrative purposes only. For Example, changing the insurer’s mailing address, phone number or updating the policyholder’s name.
Types of Insurance Endorsements
Insurance endorsements can be standard or non-standard and voluntary or mandatory.
Standard or Non-Standard
Endorsements can be standard or non-standard. A standard insurance endorsement is a pre-drafted document which is issued by an insurance service organization. These are popular among producers because standard Endorsements are readily available, and have been previously tested by and interpreted by the courts.
Non-standard Endorsements are drafted directly by the insurance company. These types of endorsements can be from a particular situation where no standard endorsement is available.
Those drafted for single use on a specific policy are known as manuscript endorsements.
Mandatory or Voluntary
Endorsements can be mandatory or voluntary. Some of its types can be added to the policy voluntarily as an option. You can decide to increase coverage through an endorsement, for example, by adding additional coverage to an Auto insurance policy. Or, you could decide to remove extra coverage from your policy, such as requesting an asbestos exclusion from general liability insurance.
Other types of endorsements are mandatory and must be included in the policy, whether you want them or not. Some of them are required by the law. For example, some states require an endorsement that makes the cancellation condition in a standard general liability more stringent or increases the amount of notice you are required to give your insurance company before canceling coverage.