What is an Endorsement?

Insurance endorsements, also known as riders, modify the terms or scope of an existing policy’s coverage. Simply put, any modification or addition to policy coverage without the full renewal or cancellation of a policy is known as an endorsement. These legally binding changes to the insurance contract can be issued right after purchasing the policy, anytime during the benefit period, or whenever you choose to renew the policy.

Unless the endorsement specifically states it is temporary, they are enforced until the end of the policy.

Key Takeaways

• An insurance endorsement, also called a rider, is a modification to your insurance policy that can adjust your coverage.
• Endorsements are legally binding and typically remain valid until the end of the policy term.
• State laws require some endorsements, but others are voluntary.
• Standard endorsements are pre-drafted documents issued by an insurance organization while non-standard endorsements are written by the insurance company.

Types of Endorsements

There are many different types of changes that can be made to an existing insurance policy. Let’s take a closer look at some of the most common types of endorsements:

• Adding coverage: By adding an endorsement, you can increase your coverage to your desired amount.
• Third party protection: This endorsement will add another person other than you to your insurance policy, such as a subcontractor.
• Additional locations: You can use endorsements to add or remove locations in an insurance policy if you own multiple properties.
• Prior acts coverage: Endorsements can modify claims-made liability policies so that they cover events that happened before the current policy took effect.
• Administrative reasons: Occasionally, endorsements are added for administrative purposes such as changing a policyholder or insurer’s name or address.

Mandatory vs Voluntary Endorsements

A voluntary endorsement is added to an insurance policy at the request of the policyholder or the insurer. For example, assume your insurance policy covers damage or theft of up to $2,000. If you recently purchased jewelry worth $3,000, you may want to add an endorsement that will provide additional coverage for your property. Alternatively, an insurer may draft an endorsement that prevents them from paying for claims related to a certain risk.

Mandatory endorsements, on the other hand, are enforced by the law. Some mandatory endorsements restrict the insurer’s right to cancel a policy. This might require the insurer to give the insured 60 days notice before terminating a policy.

Standard vs Non-Standard Endorsements

Standard endorsements are pre-drafted templates created by insurance advisory organizations and used by various insurers. Insurers often prefer standard endorsements because they are readily available and have been interpreted by courts in the past. 

Non-standard endorsements are issued independently by the insurance company. They are often created by modifying already-existing standard endorsements to provide customized coverage. A manuscript endorsement is a non-standard endorsement that is created for a single policy.

Bottom Line

Endorsements are an important component of an insurance policy, but their interpretation can result in a number of legal issues. You might want to seek legal advice if you are considering adding an endorsement to your current policy, or if you have a dispute with your insurance company about the interpretation of an endorsement.