Insurance endorsement in industry terms is nothing but a change in the original insurance policy coverage. Endorsements allow policy holders to add or curtail coverage. Endorsements when added, though, become a legal component of the policy; they are not a feature of the original policy. Thus, the policy endorsement technique allows for coverage to be added, deleted, or altered to a current policy without redrafting it. For instance, a person may have other valuable objects, apart from the initially insured property, that are not covered in the event of a loss in the original policy. Endorsements allow insurers to have these valuables added to the policy (most likely with a hike in the insurance premium). The endorsement function, therefore, gives the insurance agent/insurer greater flexibility to accommodate changes to policy without waiting for renewal.
Adding to the Existing Coverage
Endorsements can be used to add to the insurance coverage in the form of an additional policy premium. This can be, for instance, rental reimbursement for an auto insurance policy. Under this endorsement, coverage can be added for the rental when the vehicle is away for repair.
Including Additional Commodities in the Policy
Endorsement can also be used to add an additional vehicle or a home (in circumstances where the cost coverage requires alteration because of the addition) to the existing insurance policy coverage.
Restrictions to the Original Policy
An endorsement feature can also be incorporated for the restriction of coverage. There are several insurance policies that carry endorsements excluding coverage under specific circumstances like acts of terrorism, wars, and gang feuds.
Making Changes to Coverage
Apart from adding and restricting coverage, the endorsement function can also be used to make changes to the insurance policy coverage. For instance, the amount of deductible that is required to be paid in the wake of a claim can be raised under the endorsement feature.
Most Popular Homeowner Policy Endorsements
Inflation Guard – A home generally needs to be insured for at least 80% of its true value to avoid a coinsurance penalty that is applied in the event of a loss. For preventing this, homeowners can buy an inflation guard endorsement. Under this endorsement, the insurance sum is automatically increased annually (on a pro rata basis) by a figure chosen by the insurer.
Scheduled Personal Property – There are certain items like musical instruments, jewelry, or antiques which generally have a low coverage limit in comparison to their actual value. Since a majority of people do not have such items, they are not required to pay premiums for them.
Personal Property Replacement Cost - Homeowners can buy personal property replacement endorsement that can pay the repair/replacement cost minus a standard depreciation deduction.