In the world of insurance, so much effort goes into ensuring the integrity of a policy. In practice, that means that the specific language used throughout a policy is scrutinized at every level. Each word or phrase can have potential legal ramifications, so it’s essential to dot the i’s and cross the t’s, so to speak.

But that doesn’t mean a policy is set in stone once it’s signed. Insurance contracts are living documents, and they can change as circumstances require. Those changes are recorded in amendments to the policy, which are called endorsements.

We’ll spell out what endorsements are and why they matter for your business.

Let’s get started!

What are insurance policy endorsements?

An insurance policy endorsement is a change document that is added to existing insurance policies.

All standard endorsements are additional pieces of an insurance policy that, once added, become as essential as any other clause in the policy form. But not every insurance endorsement is the same. Just as insurance policies are unique, and no two plans are exact copies of each other, the same goes for endorsements.

Types of insurance endorsements

There are four main types of endorsements that get added to insurance policies:

Standard endorsements

Just like many insurance policies are governed by specific standards and prescribed language, the same is true for endorsements. Organizations like the American Association of Insurance Services (AAIS) and Insurance Securities Office (ISO) draft templates that insurers can use.

  • Insurers who subscribe to these organizations can use their templates.
  • These are among the safest, most secure endorsements.

Proprietary endorsements

Not every endorsement is cut from a template. In many cases, insurers draft their own unique endorsements to fit their and their client’s needs. Some examples of why they might choose to draft their own include:

  • For a competitive edge, offering advanced, unique coverage options.
  • If no standard exists for the specific endorsement requested.

Mandatory endorsements

In some cases, standard endorsements are required by law. Most often, these mandatory endorsements account for differences in laws at the state level. Individual states may require different coverage minimums or different rules regarding the administration of a policy endorsement.

  • An insurance carrier operating in multiple states may adopt one base policy and a set of endorsements tailored to individual states’ requirements.
  • A policyholder who moves between two states may require an insurance endorsement to a policy carried over state lines.

Optional endorsements

Some endorsements are not required by law. Instead, they are added at the request of the insurer, the policyholder, or some agreed upon combination of the two parties’ wishes. Examples include:

  • Additional, abnormal coverages requested by the policyholder.
  • Revoked coverage for certain, uniquely costly situations.

Why do insurance endorsements matter?

Because endorsements essentially alter your insurance policy, they can have real impacts on your coverage and claims.

Depending on the type of endorsement, they may have legal ramifications. The main functions of endorsements fall into the following categories:

  1. Adding coverage – An endorsement may be used to expand the policy’s coverage beyond the basic offering. Additional coverage may be added with respect to who is covered, for what coverage is being provided, or how much is being provided.
  2. Removing or limiting coverage – Endorsements are not used just to add coverage to a policy; they can also delete or limit coverage from the policy. If the agreement between insured and insurer changes, coverage can be changed in a couple of ways. An endorsement may be used to delete an entire coverage or to simply add an exclusion. Another method of limiting coverage is to apply a separate lower limit of insurance to a specific type of claim. In any of these cases, coverage can be eliminated or limited via an endorsement that specifies the scope of the coverage change.
  3. Modifying coverage – An endorsement may also change the scope of insurance coverage without simply applying a flat addition or subtraction. A modification may involve a change to the clauses of a policy form, or an addition that is conditional upon a subtraction elsewhere.
  4. Administrative edits – If certain details about the policyholder or any other relevant party change, those changes need to be noted in an administrative edit endorsement. For example, mailing address changes or a change in name or title would need to be reflected in the policy.
  5. Edits for clarification – Finally, some endorsements involve changes that don’t adjust the substance of a policy. In the event that a clause is misunderstood or misinterpreted, an endorsement may be needed to clarify the language and make it more easily understandable.

Endorsements are essentially how an insurance policy is edited. Whether the edits have to do with the contents of the plan, or they’re simply surface level commentary, an endorsement is needed.

Get the exact coverage you need

Endorsements are ultimately one of the ways that insurers and policyholders can revisit and customize plans to their exact needs. As a recap, the main takeaways about insurance endorsements are:

  • They can be standard or non-standard
  • They’re also either legally mandated or voluntary
  • They add to, subtract from, or otherwise modify a policy
  • They can also account for clarifications or commentary added to a policy

With all the technical language involved in writing and rewriting plans, endorsements can be one of the more complicated aspects of insurance.

But here at Thimble, we want to simplify every element of insurance.

That’s why we’re changing how you purchase business insurance. We believe that every business deserves access to premium, customizable insurance that works for you. We also believe that access should be as simple as possible, with easy sign-up procedures and, of course, low costs. At Thimble, our plans can be tailored down to the hour, day, or month, and you can sign up in under 60 seconds.

From general liability insurance to professional liability insurance, we can find a plan that fits your needs and your schedule. Just download the Thimble app or click on “Get a Quote,” and answer three simple questions. We’ll generate an instant quote and once you click to purchase we’ll send your policy terms and Certificates of Insurance (COI) to your inbox. And revisions? They’re easy to make on-the-go using the Thimble mobile app.