What are endorsements in insurance

Insurance companies don’t write insurance contracts from scratch for each of their customers. Instead, insurers use standard policy wordings, and they only need to adjust details from customer to customer.

Details like limits of coverage are certainly different in each policy, but the bulk of an insurance contract is “off the shelf.”

Here’s why endorsements exist.

When an insured has a need that isn’t covered by standard policy wordings, insurance companies can still accommodate them. The insurance company adds an endorsement to the policy that overrides the standard policy wordings.

Example

Vanessa just moved into a new home and bought a new homeowner’s insurance policy to go with it. Her insurer’s standard policy includes a $500 coverage limit for jewellery. Vanessa, however, has quite an extensive collection of jewellery. She’s had it appraised at $15,000.

Vanessa asks her insurer if they can increase the coverage limit to accommodate her jewellery collection. The insurance company agrees to do so and adds an endorsement to her policy raising the limit of coverage for jewellery to $15,000. Vanessa pays a higher premium in return.

An endorsement overrides anything it needs to in the standard policy wordings, to provide the desired level of coverage.

Insurance companies use endorsements for much more than just adjusting coverage limits, however. Here are a few other common uses of endorsements:

• Adding or excluding covered perils. Many home insurers exclude earthquake coverage in their standard policies. They may allow insureds to add earthquake coverage to their policy with an endorsement. On the flip side, an insurer may include flood coverage by default, but use an endorsement to remove that coverage from a home sitting on a floodplain.

• Enforcing different deductibles. An insurer can add an endorsement that changes the deductible for certain losses. For example, a policy with a standard deductible of $500 may have an endorsement that enforces a $10,000 deductible on water damage claims caused by faulty plumbing. An insurer may use such an endorsement if they know a home’s plumbing system is old and likely to fail, but they’re still willing to insure the home. They’ll usually ask the insured to upgrade their plumbing system before they can remove the endorsement.

• Changing policy details. If the information within a policy document needs to be changed before the annual renewal, the insurer can make the change using an endorsement. For example, if the occupancy of the home changes.

• Insuring a home-based business. Home insurers can insure property used for certain home-based businesses that meet their guidelines. But first, insureds need to request an endorsement that includes their business property.

Usually, the insured requests that their insurance company add an endorsement to their policy. Sometimes, though, the insurer adds endorsements of their own, which are not optional.

As in the example above, where an insurer adds a $10,000 deductible for claims arising from burst pipes, sometimes insurers enforce higher deductibles or lower limits than what their standard policy offers.

These types of endorsements aren’t optional; if the insured wants the policy, they must accept the terms. Mandatory endorsements of this nature aren’t common, however.

What is the difference between an endorsement and a rider?

Endorsements are also known as riders. Rider and endorsement are the same thing; they both refer to changes made to an insurance contract. Floater is another term you’ll sometimes hear, which also means roughly the same thing. You’ll often hear these terms used interchangeably.

In general, endorsements are used to expand or restrict coverage for certain types of loss. For example, a sewer backup endorsement adds coverage for losses caused by sewer backups to a policy that otherwise wouldn’t cover them.

Meanwhile, riders and floaters are used to add certain types of property to the policy. For example, a jewellery rider adds coverage for individual pieces of jewellery that might not have enough coverage under the standard policy. Or, a watercraft floater would add coverage for individual boats.

How does Square One use endorsements?

Square One handles many common endorsements differently from other home insurance providers, so we’ll take a minute to explain here:

Homeowners often ask their insurer to add endorsements that cover their specialty property, like jewellery or watercraft. Most standard policies have just small limits for these types of items, so anyone who needs more coverage must ask for an endorsement.

Square One makes it easy for our customers to personalize their policies. Instead of issuing endorsements for speciality property, we let insureds choose which types of speciality property they want to insure and for how much. Those choices happen within the application, so they’re reflected in the policy wordings.

We also include earthquake and overland flood coverage in most of our policies by default, so there’s no need for most insureds to add these coverages via endorsement.

In Square One’s case, we use what’s called limited depreciation. If an insured chooses not to replace their lost or damaged stuff, we can often provide them with a limited depreciation settlement. That means we’ll deduct no more than 50% of an item’s replacement cost for depreciation. That often means a greater payout than other policies that always apply full depreciation.

The important points

• Endorsements are additions to an insurance policy that override whatever the original policy document says.
• Insurers can add mandatory endorsements to policies that the insured must accept before buying the policy.
• Insureds often request endorsements to enhance their coverage for speciality property, or to add coverage that isn’t part of their insurance company’s standard policy.

Looking for another insurance definition? Look it up in The Insurance Glossary, home to dozens of easy-to-follow definitions for the most common insurance terms. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.

About the expert: Stefan Tirschler

Stefan is responsible for underwriting leadership, market expansion, and product research and development for Square One's operations. Stefan has earned his Fellow Chartered Insurance Professional designation, and maintains a level 2 general insurance license in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. Stefan is also an Education Committee member and CIP/GIE instructor for the Insurance Institute of Canada.

An insurance endorsement modifies coverage on an existing policy. This can include adding coverage not initially specified, removing or limiting coverage, or altering people or locations covered. Insurance endorsements are also known as “riders.”

Endorsements are not the same thing as entirely changing your homeowners insurance policy. Instead, they simply add to, limit or exclude coverage on an existing policy.

An insurance endorsement is a legally binding change to your initial policy. Let’s say you just purchased homeowners insurance. Your initial policy may cover standard damages, like replacing your roof after a fire. However, the loss of expensive personal property – like jewelry or furniture – may not be covered. To stay fully protected in these scenarios, you may consider adding an insurance endorsement to your policy.

Endorsements can increase or decrease coverage limits, change addresses or names, or otherwise alter your policy. Endorsements in insurance take precedence over your initial policy and void outdated information. Not sure what your initial policy covers? You can always check by looking at your homeowners insurance declaration page.

Insurance endorsements can be added at the time of purchase, during your contract or at renewal time. If you’d like to modify your policy, or if you’re notified about a new endorsement on your policy, check with your insurance agent. This can help you be sure you have the appropriate coverage.

You may have also heard of insurance riders. What is a rider? It’s just another name for an insurance endorsement. You may see the following terms used interchangeably to describe endorsements:

• Insurance endorsement
• Amendatory endorsement
• Rider
• Insurance rider

If you see any of the above words, know they’re referring to a legal change in your insurance policy. You can effectively substitute the words “policy change” if it helps make reading legal documents easier for you.

Insurance endorsements modify your existing policy. Generally, this works in one of several ways:

• Adding coverage: Want to insure valuable jewelry? Your initial homeowners policy may cover damage or theft up to a certain amount – say $500. If your jewelry is worth $1,000, you could be out of luck. However, an amendatory endorsement can add coverage up to the desired amount so you can stay protected.
• Limiting or excluding coverage: If your policy includes coverage you don’t need, you may be able to save money by limiting or excluding coverages. For example, if your HOA covers exterior insurance, you may consider limiting your coverage to only your home’s interior.
• Add or remove people: Recently married or divorced? You can use an insurance rider to adjust who owns a property on insurance documents.
• Add or remove locations: If you own multiple properties, it may save you some money to bundle multiple locations together on the same policy. Endorsements can help you add new locations to or remove sold properties from an existing policy whenever you need.

Remember that endorsements can be added anytime – at initial purchase, during your contract or at renewal. Endorsements may change your policy rate, so check with your agent if you have any questions about price. Endorsements are valid and active for the length of your policy and renew the same way, unless otherwise stated.

Standard Endorsements

Standard endorsements are commonly requested. These endorsements are templated by insurance companies so they can easily be applied to your policy upon request. Standard endorsements include things like:

• Name changes
• Address changes
• Sewer backup endorsement
• Earthquake endorsement

The American Land Title Association (ALTA) has hundreds of standard endorsements covering common changes to title insurance policies.1 These cover common issues that may arise with your title, such as zoning or tax mishaps.

Nonstandard Endorsements

Nonstandard endorsements are either specially drafted documents or changes to standard templates. It is not likely you’ll need to request any nonstandard endorsements, and doing so is usually not recommended. Nonstandard endorsements may have misleading language that makes you think you are covered when you’re not. Some insurance companies even refuse to accept non-standard endorsements to keep all parties safe.2

Mandatory Endorsements

Mandatory endorsements are those required by law. For example, flood insurance is not typically covered by most standard homeowners insurance policies.3 However, if your home or business is in a high-risk flood area and your mortgage is federally backed, the Federal Emergency Management Agency (FEMA) requires you to purchase flood insurance. If you’re unsure whether your state requires any mandatory endorsements, ask your real estate agent, lender or another real estate professional. 

Voluntary Endorsements

Unlike mandatory endorsements, voluntary endorsements are not required by law. Most endorsements will fall under this category. Let’s say you’re purchasing real estate in an area prone to earthquakes. The law doesn’t require you to add earthquake insurance to your policy, but you’d rather stay on the safe side. In this scenario, adding an earthquake insurance endorsement to your policy would be a voluntary endorsement.

Wondering what types of insurance endorsements you may need? The list of insurance endorsements is nearly endless, but we’ll go over some of the most common riders. As a homeowner, you may want to consider these options to make sure you are fully protected. 

Scheduled Personal Property Endorsement

This endorsement adds coverage for valuable personal items you may own, like jewelry, art or collectibles. Using this endorsement allows you to up your coverage limits, so in case of theft or damage, you can be adequately reimbursed.

Recommended if: You have valuable jewelry, art or other personal items in your home. 

Water/Sewer Backup Endorsement

Water damage can be expensive, especially if the issue results in additional issues like mold or mildew. If your water or sewage pipes overflow and cause damage to your home or personal property, water/sewer backup endorsements can help cover the costs.

Recommended if: You live in a city with known sewage issues, or the previous owner disclosed any issues with pipes.

Flood Endorsement

Most standard homeowners insurance policies do not cover flooding.3 If you live in a high-risk area, adding flood coverage to your policy can protect you in case of disaster. Some areas may even mandate you add flood coverage to your policy.

Recommended if: You live in a high-risk flood area, or if mandated by state laws.

Earthquake Endorsement

Earthquake endorsements can help you cover costs associated with earthquake damage. This can include anything from removing debris to necessary living costs while your home is being repaired. Some exclusions apply – possibly land or vehicle damage – so be sure to ask your insurance agent what your policy covers.4

Recommended if: You live in an area prone to earthquakes, such as California.

Identity Theft Endorsement

This endorsement can help cover costs brought on by identity theft. Coverage options vary depending on your policy, but can typically help pay for ID replacement, fraud services or associated legal fees.

Recommended if: You don’t want the hassle of monitoring your own credit reports for fraudulent activity.

Canine Liability Exclusion Endorsement

Homeowners insurance and pets go hand in hand. However, many standard homeowners insurance policies come with canine liability exclusions. These limit the insurer’s responsibility with costs brought on by your dog. Standard policies typically cover liability associated with dog bites or damage to someone else’s property caused by your dog. If you want additional coverage, like veterinarian services, ask your agent what coverage options are available to you.

Recommended if: You have a dog and don’t have additional pet insurance.

Additional Insured Endorsement

Additional insured endorsements add coverage to another person under the primary policyholder. This extends liability coverage so the additional insured can sue if a claim is brought against them. In real estate, landlords may require a tenant to add coverage to their renters insurance so the landlord is covered under the renter’s policy.

Recommended if: You want to extend liability coverage to other individuals not originally included in your standard policy.

Home Business Endorsement

If you run a small business out of your home, costs associated with your business are most likely not covered by standard homeowners insurance. This means damaged or stolen work supplies or equipment would not be covered. If you have an at-home business, consider adding a home business endorsement to your policy to stay protected.

Recommended if: You run a small business out of your home.

The easiest way to request an insurance endorsement is to contact your insurance agent. If you already have a policy, try locating the phone number or email address for your agent. If you can’t find your specific agent’s contact information, you can always contact a general phone line or email address to redirect you to the correct agent.

You can also request endorsements during the enrollment process if you don’t already have a policy. Ask your agent what added coverages are available depending on what fits your needs.

If you already know exactly what endorsements you need and what documents are needed for each, you can request endorsements be added to your policy through a letter with the necessary documents attached.

Your home is one of your most valuable assets, and insurance endorsements can help make sure it’s properly protected. From research to closing, Rocket Mortgage® is here to help you navigate the home buying process. If you need other resources on buying or refinancing your home, be sure to check out our complete home buyer’s guide. Confused about other home buying terms? Don’t forget to check out these 27 mortgage terms you should know!