What Are Insurance Endorsements?

What are insurance endorsements? 

Insurance endorsements, also known as insurance riders, are amendments to your insurance policy that add, remove or change coverage. An endorsement can also increase standard coverage limits and take precedence over the original policy. 

Insurance endorsements 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 endorsements work?

You may already have encountered a pre-drafted standard endorsement to your existing homeowner’s policy, such as additional coverage for household mold removal or backed-up sewers or drains. Such an endorsement mitigates specific risks related to costly repairs or household damage. 

These endorsements are similar to those used in business insurance. In business insurance, endorsements 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 endorsements like umbrella coverage. 

Types of insurance endorsements and examples

There are several types of insurance endorsements, including the following:

Standard endorsements

Standard endorsements are among the most commonly requested; examples include name and address changes, earthquake endorsements, and endorsements to protect against zoning or tax errors. Insurance companies have templates for these endorsements written by insurance organizations like the Insurance Services Office (ISO) to ensure they meet legal requirements.

Nonstandard endorsements

Nonstandard endorsements cover unique situations not included in standard endorsements, 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 endorsement suits your situation.

Mandatory endorsements

Mandatory endorsements are legally required, such as flood insurance in geographic regions at high risk of flooding and specific endorsements mandated by ISO regulations. Your broker or insurance agent can inform you of any mandatory endorsements in your area. 

Voluntary endorsements

Most endorsements are considered voluntary endorsements that policyholders or insurers may choose (but are not required) to add.

Regardless of type, most insurance endorsements do the following:  

• Modify or add coverage. An endorsement 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 endorsements, such as the length of time you can cancel a policy.
• Exclude or narrow coverage. Some endorsements 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 endorsements that narrow existing coverage by excluding coverage for bodily injury and property damage arising from negligence.

Endorsements 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 endorsements

Here are the most common ways to use endorsements to modify or add coverage to your current policy.

Business property

Business property adjustments are among the most common endorsements. A business property endorsement can include extended insurance coverage on your equipment or products. You can also opt for endorsements that increase or decrease your company’s property limits. 

Blanket additional insured

You’ll usually find a blanket additional insured endorsement if you have commercial general liability insurance or a commercial property policy. This endorsement 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 endorsements, 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 endorsement covers claims for events that happened before the purchase of the liability insurance policy. This endorsement is necessary if your insurance policy doesn’t include a retroactive date and outstanding claims are still in process.

Extended reporting period (ERP)

This endorsement, 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 endorsement 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 endorsement 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 endorsement 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 endorsement 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.

Commercial lease and tenant

Adding this endorsement 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 endorsement 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 endorsement 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 endorsement 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 endorsement?

When working with most insurance companies, adding or removing endorsements 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 endorsement samples for your industry. These endorsements are often available at a lower rate than ones you purchase separately.

Many state statutes — including New York’s — mandate that insurance endorsements 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.

Regulations governing endorsements

Insurance companies can add an endorsement 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 endorsement 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 endorsements may not be unjust, unfair, inequitable, misleading or deceptive.” Also, “Coverage forms are prior approval. Change endorsements 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 endorsement will not be used to change, alter or clarify coverage.”

Danielle Fallon-O’Leary contributed to this article.