Whether you’re shopping for a new insurance policy or examining your existing policy, insurance endorsem*nts can mitigate specific risks or loss exposure. Endorsem*nts broaden or narrow coverage on an existing insurance policy; most insurers offer them as add-ons, allowing you to increase coverage as needed. Some endorsem*nts provide additional protection for insurers, while others protect your business.
Tip
When choosing business insurance, it’s crucial to know your options and identify your risk management goals. Consult an insurance representative to ensure your coverage meets your business’s needs.
What are insurance endorsem*nts?
Insurance endorsem*nts, also known as insurance riders, are amendments to your insurance policy that add, remove or change coverage. An endorsem*nt can also increase standard coverage limits and take precedence over the original policy.
Insurance endorsem*nts can replace your current policy, or you can add them to an existing policy. Additional documents can modify an existing insurance agreement, policy definition, exclusions or conditions in the coverage form; they can also add more information to the declarations page.
How do insurance endorsem*nts work?
You may already have encountered a pre-drafted standard endorsem*nt to your existing homeowner’s policy, such as additional coverage for household mold removal or backed-up sewers or drains. Such an endorsem*nt mitigates specific risks related to costly repairs or household damage.
These endorsem*nts are similar to those used in business insurance. In business insurance, endorsem*nts may protect business-related property, mitigate equipment breakdown risks or extend the reporting period for errors and omissions insurance coverage. For example, a business insurance policy can contain endorsem*nts like umbrella coverage.
Did You Know?
The insurer can draft a single-use endorsem*nt – called a manuscript endorsem*nt – for a specific policy, such as a business owner’s policy. This endorsem*nt is helpful if your company needs coverage beyond standard endorsem*nts.
Types of insurance endorsem*nts and examples
There are several types of insurance endorsem*nts, including the following:
Standard endorsem*nts
Standard endorsem*nts are among the most commonly requested; examples include name and address changes, earthquake endorsem*nts, and endorsem*nts to protect against zoning or tax errors. Insurance companies have templates for these endorsem*nts written by insurance organizations like the Insurance Services Office (ISO) to ensure they meet legal requirements.
Nonstandard endorsem*nts
Nonstandard endorsem*nts cover unique situations not included in standard endorsem*nts, such as protecting against specific exposures or safeguarding a valuable asset. Insurance companies will modify standard templates or draft new documents to meet your business’s needs. It’s best to consult a legal professional to determine if a nonstandard endorsem*nt suits your situation.
Mandatory endorsem*nts
Mandatory endorsem*nts are legally required, such as flood insurance in geographic regions at high risk of flooding and specific endorsem*nts mandated by ISO regulations. Your broker or insurance agent can inform you of any mandatory endorsem*nts in your area.
Voluntary endorsem*nts
Most endorsem*nts are considered voluntary endorsem*nts that policyholders or insurers may choose (but are not required) to add.
Regardless of type, most insurance endorsem*nts do the following:
- Modify or add coverage. An endorsem*nt can modify or expand the scope of your existing coverage. For example, it can add industry-specific enhancements, extra parties, new business locations or loss payees. State law even mandates some endorsem*nts, such as the length of time you can cancel a policy.
- Exclude or narrow coverage. Some endorsem*nts exclude coverage for specific claims to help mitigate your company’s risk. A health-related example in commercial property insurance policies is an exclusion because of viruses, bacteria or other microorganisms. In another example, some professional services policies have endorsem*nts that narrow existing coverage by excluding coverage for bodily injury and property damage arising from negligence.
Endorsem*nts can also be content changes under these categories:
- Editorial changes. These updates are made by the insurer and clarify the policy without changing the coverage.
- Administrative changes. These revisions reflect the document’s validity and incorporate details like an updated mailing address.
How to use endorsem*nts
Here are the most common ways to use endorsem*nts to modify or add coverage to your current policy.
Business property
Business property adjustments are among the most common endorsem*nts. A business property endorsem*nt can include extended insurance coverage on your equipment or products. You can also opt for endorsem*nts that increase or decrease your company’s property limits.
Blanket additional insured
You’ll usually find a blanket additional insured endorsem*nt if you have commercial general liability insurance or a commercial property policy. This endorsem*nt extends protection to a person — such as a contractor, client or another entity — if your business is contractually required to do so. It can also be used as protection against third-party lawsuits.
Waiver of subrogation
Found in commercial insurance endorsem*nts, a waiver of subrogation prohibits an insurance carrier from recovering the money it paid on a claim from a negligent third party.
Prior acts coverage
A prior acts coverage endorsem*nt covers claims for events that happened before the purchase of the liability insurance policy. This endorsem*nt is necessary if your insurance policy doesn’t include a retroactive date and outstanding claims are still in process.
Extended reporting period (ERP)
This endorsem*nt, which you can add to an errors and omissions insurance policy, extends coverage so you can submit a claim even after a policy expiration date has passed — typically in the one- to five-year range.
Equipment breakdown or business interruption
Adding this endorsem*nt to your commercial property insurance will cover equipment losses and breakdowns or a business interruption. The interruption may be time and labor costs incurred by a sudden mechanical, electrical, refrigeration or computer malfunction.
Primary and noncontributory language
You would request this endorsem*nt because if you endure a loss, it uses your primary insurance first before seeking a contribution from other policies.
Identity theft and cyber protection
Add this endorsem*nt to your existing policy to insure against losses and expenses, including legal fees from stolen property, identity theft, cyberattacks, cyber extortion and compromised data.
This endorsem*nt type is especially important for your small business. Verizon’s 2023 Data Breach Investigations Report details how cybercrime affects your company. The report highlights several emerging threats, including “pretexting” to trick respondents into sharing sensitive information, ransomware attacks and Log4j vulnerability exploitations.
Tip
Your business may want to consider data breach or cyber liability insurance. Data breach insurance covers costs directly attributed to a data breach; cyber insurance also pays attorney’s fees and regulatory fines.
Commercial lease and tenant
Adding this endorsem*nt type to your commercial general policy will cover liabilities incurred by a tenant’s operations or negligence in a leased space.
Hired and nonhired auto
This endorsem*nt is helpful for small businesses that don’t need commercial automobile insurance but have employees who rent, borrow or use their vehicles for work. When you add this endorsem*nt to your company policy, you’ll gain coverage for physical damage to another person’s car, medical expenses if someone else gets hurt in an accident, or legal expenses if your business is sued.
Note that a hired and nonhired auto endorsem*nt doesn’t cover the policy owner, including medical bills if you or your employee get hurt in an accident while using a rented or personally owned vehicle.
How do you add or request an endorsem*nt?
When working with most insurance companies, adding or removing endorsem*nts from your basic policy is as simple as speaking with your broker and discussing your risk-management goals. You can alter your coverage at any time during your current policy period or a natural period of change, such as amid a renewal.
You can also ask if the insurance company has standard endorsem*nt samples for your industry. These endorsem*nts are often available at a lower rate than ones you purchase separately.
Many state statutes — including New York’s — mandate that insurance endorsem*nts be filed with the superintendent of insurance to be binding. These types of riders can last for the duration of the policy or continue upon renewal.
FYI
Be mindful of your business insurance costs when requesting endorsem*nts. Adding an endorsem*nt may raise your monthly insurance premium.
Regulations governing endorsem*nts
Insurance companies can add an endorsem*nt that either excludes or includes a different type of coverage to help mitigate its risk; however, you must be informed of these exclusions or modifications.
Rest assured, many states have protections and guidelines in place, and such a policy change will be reviewed for approval. According to the New York State Department of Financial Services, which governs the insurance marketplace, “If a Certificate of Insurance amends, expands or otherwise alters the terms of the applicable insurance policy, it constitutes an endorsem*nt that is a policy form, which, subject to certain exceptions, must be filed with the Superintendent of Insurance pursuant to section 2307(b).”
Another example of a state’s protections: Under Chapter 2301 of the Texas Insurance Code, “Policy forms and endorsem*nts may not be unjust, unfair, inequitable, misleading or deceptive.” Also, “Coverage forms are prior approval. Change endorsem*nts may be used to change insured address, etc., but may not be used to change, alter or ‘clarify’ coverage in any way. Company must provide verification that the endorsem*nt will not be used to change, alter or clarify coverage.”
Insurance endorsem*nt FAQs
An endorsem*nt is typically valid for as long as your policy is active. However, some endorsem*nts have limited terms; your policy will specify these. If your endorsem*nt is set to expire, you have the option to renew your endorsem*nt along with your policy.
Endorsem*nts sometimes have deductibles, though the specific amount will vary. For belongings protected by personal property coverage, you will likely have a deductible. In other situations, such as adding scheduled personal property coverage, you might be eligible for a lower or no deductible. Your insurance provider can provide further information on endorsem*nt-specific deductibles.
The cost of an insurance rider will depend on your coverage type. However, it usually costs 1 percent to 2 percent of your dwelling coverage each year. For example, if you’re covering an item worth $10,000, your rider could cost between $100 and $200. Therefore, the higher the value of your belongings, the more your rider will cost.
If you’ve experienced any changes to your business or want to protect items of value, you may need to add an insurance endorsem*nt. Review your policies annually to ensure they continue to meet your needs; you can also consult with your insurance provider to help you navigate your options.
Danielle Fallon-O’Leary contributed to this article.
