What Are Insurance Endorsements?

Definition & Examples of Insurance Endorsements

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An insurance endorsement is an amendment to a property and casualty insurance policy. It can add, remove, or change the policy's coverage.

Learn more about insurance endorsements and how they work.

What Is an Insurance Endorsement?

In property and casualty insurance, an endorsement is a document attached to an insurance contract that amends a policy. An endorsement may have its own limits and deductible. In life and health insurance, an endorsement is referred to as a rider.

An endorsement can be added when the policy is issued, during your policy term, or when you renew your policy. It may increase or decrease your insurance costs depending on the changes being made to the policy.

  • Alternate name: Rider

How an Insurance Endorsement Works

An endorsement typically serves one or more of the following purposes:

  • Removing coverage: Many endorsements serve as exclusions, eliminating coverage for certain types of claims. An example is an endorsement added to a general liability policy that excludes bodily injury or property damage arising out of any exposure to asbestos.
  • Adding coverage: Endorsements are frequently used to add coverage not provided by the basic policy. An example is a voluntary compensation endorsement, which can be added to a standard workers compensation policy for an additional premium. This endorsement is used to extend workers compensation benefits to workers who aren't covered by state workers compensation laws.
  • Modifying coverage: Some endorsements modify the scope of coverage rather than adding or removing it. For example, a margin clause may be added to a commercial property policy that includes a blanket limit. When this clause is included, the amount you receive for a loss at a single location may be less than the blanket limit.
  • Editorial changes: Some endorsements clarify the intent of a policy without altering the coverage. For example, an insurer accidentally omits a word in a newly-published policy form. The insurer corrects the error in an endorsement that adds the missing word.
  • Administrative changes: Endorsements may be added for administrative purposes, such as changing the insurer's mailing address 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

Many endorsements used in the insurance industry are standardized. Standard endorsements are drafted and published by insurance advisory organizations such as the Insurance Services Office (ISO) or the American Association of Insurance Services (AAIS).

Insurers can use these endorsements if they have purchased a subscription from the publisher. Standard endorsements are widely used in the marketplace. Many have been analyzed by courts so insurers can predict how they are likely to be interpreted in future litigation. For this reason, standard endorsements may be less risky for insurers than endorsements they have drafted themselves.

Non-standard endorsements are devised by insurers. An insurer may draft an endorsement to achieve a purpose for which no standard endorsement is available. Insurers also create endorsements to gain a competitive advantage. For instance, many insurers offer a "broadening" endorsement that can be attached to a general liability or commercial auto policy. Often, endorsements created by insurers are simply variations of standard endorsements. The insurer uses an ISO endorsement as a template and then alters the wording as it chooses.

Some non-standard endorsements are drafted for a specific policyholder. Called manuscript endorsements, these are designed to be used on a single policy and address unique situations.

Mandatory or Voluntary

Some endorsements are added to a policy voluntarily, at the option of the insured or the insurer. An example is a liquor liability endorsement added to a general liability policy at the policyholder's request. Liquor liability coverage protects businesses that sell liquor if there's a claim resulting from alcohol use.

Other endorsements are elected by the insurer. For instance, an insurer attaches an asbestos exclusion to a policyholder's liability policy to avoid paying asbestos-related claims.

Some endorsements are mandated by state law. For instance, many states have drafted an endorsement that amends the cancellation condition found in a standard general liability policy. This endorsement may restrict the insurer's ability to cancel a policy. It may also require the insurer to notify the insured 45 or 60 days in advance of a pending cancellation, rather than 30 days as stated in the standard policy.

Some endorsements are mandated by ISO rules rather than state law. ISO's underwriting rules may require a particular endorsement on all policies providing a certain type of coverage. For instance, ISO dictates the addition of a nuclear energy liability exclusion to all general liability policies. This endorsement excludes coverage for losses from a nuclear incident.

Other endorsements are required on policies covering certain types of operations. For example, if an architectural or engineering firm is insured under a general liability policy, the policy must include a professional liability exclusion. The firm must buy a separate professional liability policy if it wants that coverage.

Key Takeaways

  • An insurance endorsement is an amendment to a property and casualty insurance policy.
  • An endorsement can add, remove, or change the coverage in the policy.
  • Insurance endorsements can be standard, which means they are published by an industry advisory organization, or non-standard, which means they are developed by insurers. 
  • Insurance endorsements can also be voluntary, which means they’re added at the request of the insured or insurer, or mandatory, which means they must be added to the policy. 

 

Article Sources

  1. IRMI. "Voluntary Compensation Endorsement." Accessed July 19, 2020.

  2. IRMI. "Margin Clause." Accessed June 19, 2020.

  3. IRMI. "Nuclear Exclusion." Accessed July 19, 2020.