endorsement in insurance
By Okbima 11 Apr 2024 11

Endorsement In Insurance 2024: Meaning, Types, And Examples

 

The endorsement in insurance is a modification or addition of specific terms, conditions, or coverage to an existing insurance policy. It is beneficial for policyholders who may need to make adjustments to their coverage based on their needs. Factors to consider before endorsing a policy include the impact on premiums, coverage limits, and any potential exclusions. Let’s understand its purpose, types, examples, and factors to consider.

 

What Is Endorsement In Insurance?

In insurance, endorsement is any change or alteration made to an insurance policy by the policyholder or the insurance company. These changes include adding or removing coverage, changing policy details, or modifying terms and conditions. Endorsements are common in the insurance industry. Endorsements can be made to all insurance policies, including health insurance, life insurance, motor insurance, property insurance, etc.

Endorsements are initiated by the policyholder when they need to change their existing policy. For example, if a policyholder purchases a new car and wants to add it to their existing motor insurance policy, they would need to request an endorsement to include coverage for the new vehicle. Insurance companies also have the authority to make endorsements to policies. This can happen if there are changes in underwriting rules or regulatory requirements, or if there are modifications needed to ensure accurate coverage.

 

Purpose of Insurance Endorsements

There are several reasons for insurance endorsements, including policy customization, adding or removing coverage, policy clarification, etc.

  • Policy customization: Endorsements allow policyholders to customize their insurance coverage to meet their individual needs. This could include adding additional coverage, changing policy limits, or adjusting policy terms.

  • Adding or removing coverage: Policyholders may need to add or remove coverage to their insurance policy based on their changing needs or circumstances. For example, a policyholder may want to add coverage for natural disasters or remove coverage for a particular risk that is no longer relevant.

  • Policy clarification: Endorsements can help clarify certain terms or conditions within an insurance policy. This can help prevent misunderstandings or disputes between the insurer and the policyholder.

  • Coverage enhancements: Endorsements can also be used to enhance or expand coverage options within an insurance policy. This could include adding coverage for specific risks or events that are not typically included in a standard policy.

  • Endorsement renewals: Insurance endorsements may need to be renewed periodically to ensure that the policy remains up to date and continues to meet the needs of the policyholder.

 

Personalize your insurance policy with endorsements: Ask Our Expert!

 

Types of Endorsement In Insurance

In India, there are mainly two types of endorsement in insurance which include Financial Endorsements, and Non-Financial Endorsements.

Financial Endorsements

Financial Endorsements directly impact the premium amount you pay.

  • Adding Coverage: This can increase the sum assured in life insurance, expand medical coverage in health insurance, or include additional electrical/non-electrical accessories in car insurance. Each addition usually leads to a higher premium.

  • Removing Coverage: Removing a driver from your car insurance or opting out of business use coverage can decrease your premium.

  • Changes Affecting Risk: Adding a risky hobby (like skydiving) to your term insurance policy might increase the premium.

 

Non-Financial Endorsements

Non-financial endorsements can affect the coverage but don't affect the premium.

  • Change in Beneficiary: Updating the beneficiary details in your life insurance policy doesn't affect the premium.

  • Correction of Information: Fixing errors in your policy, like date of birth or vehicle details, is a non-financial endorsement.

  • Change in Address: Informing the insurer about your new address usually doesn't impact the premium.

 

Examples Of Insurance Endorsements

Here we are providing three examples of endorsement in Insurance for motor insurance, health insurance, and life insurance.

Motor Insurance

  • Roadside assistance cover: Provides services such as towing, battery jump-start, flat tire assistance, fuel delivery, and locksmith services in case of a breakdown or accident.

  • Key replacement cover: This coverage provides reimbursement for the cost of replacing lost or stolen keys of the insured vehicle.

  • Invoice cover: Ensures that the policyholder receives the full invoice value of the vehicle in case of total loss or theft, including registration fees and road tax.

  • Daily allowance cover: Provides a daily cash benefit to the policyholder for alternative transportation expenses in case the insured vehicle is in the garage for repairs due to a covered claim.

  • Legal liability cover for paid driver: This endorsement provides coverage for legal liability in case of injury or death of a paid driver while driving the insured vehicle.

  • Hospital cash cover: This endorsement provides a daily cash benefit to the policyholder or passengers for hospitalization due to injuries sustained in a covered accident.

 

Health Insurance

  • Critical illness cover: Provides a lump sum amount in case the policyholder is diagnosed with a critical illness covered under the policy.

  • Pre-existing disease cover: Includes treatment for pre-existing diseases or conditions that the policyholder may have at the time of purchasing the insurance policy.

  • Maternity cover: Includes expenses related to maternity and childbirth, including pre and post-natal care.

  • Ayush treatment cover: Covers expenses related to alternative forms of medicine such as Ayurveda, Yoga, Naturopathy, Unani, Siddha, and Homeopathy.

  • Organ transplant cover: Covers the expenses related to organ transplant surgery and post-operative care.

  • Daycare procedures cover: Provides coverage for medical procedures that do not require an overnight hospital stay.

  • Personal accident cover: Provides financial protection in case of accidental injuries, disabilities, or death.

  • Ambulance cover: Covers the expenses incurred for ambulance services during emergencies.

  • Dental cover: Covers expenses related to dental treatments, including routine check-ups, cleanings, and fillings.

 

Life Insurance

  • Critical illness cover: Provides a lump sum amount to the policyholder in case they are diagnosed with a critical illness specified in the insurance policy, such as cancer, heart attack, or stroke.

  • Accidental disability rider: This rider provides additional coverage in case the policyholder becomes disabled due to an accident, offering financial protection in addition to the base life insurance policy.

  • Waiver of premium rider: This rider waives off future premiums in case the policyholder becomes disabled or critically ill, ensuring that the policy continues without any financial burden on the policyholder.

  • Income protection cover: Provides a monthly income to the policyholder in case they are unable to work due to a disability or illness, ensuring a continued source of income for the policyholder and their family.

  • Increasing or decreasing cover: Allows the policyholder to increase or decrease the coverage amount of the life insurance policy over time, based on changing financial needs and circumstances.

  • Child education cover: Ensures that the policyholder's children receive financial support for their education in case of the policyholder's death or disability, helping secure their future educational needs.

 

Factors To Check In Insurance Endorsement

There are so many factors to check before taking an endorsement in Insurance which are keeping records of all insurance endorsements, consulting with an insurance agent, reviewing your policy regularly, etc.

  • Keep records of all insurance endorsements: Policyholders should keep a record of all insurance endorsements made to their policy, including the date of endorsement, the reason for the endorsement, and any relevant documents associated with the change.

  • Communicate changes: Policyholders should communicate any changes or updates to their insurance provider promptly to ensure that their policy is accurate and up to date.

  • Consult with an insurance agent: If policyholders are unsure about the impact of a particular endorsement on their policy, they should consult with their insurance agent or provider for guidance.

  • Review your policy regularly: Policyholders should review their insurance policy regularly to ensure that it meets their current needs and circumstances. If any changes are required, they should request the necessary endorsements to update their policy.

 

Need Expert Help? Contact Our Experts!
 

Read More:

Section 37 Of Income Tax Act: Expenses Allowed & Not Allowed As Deduction

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Why Buy Transit Insurance? Protect Your Household Goods

 

Conclusion

In conclusion, endorsement in insurance plays a crucial role in customizing and modifying existing insurance policies to better suit the needs of the insured. By providing additional coverage, exclusions, or changes to policy terms, endorsements can help individuals or businesses receive more comprehensive protection. 

With various types of endorsements available, such as policy riders, exclusions, or amendments, insurance policies can be tailored to address specific risks or circumstances. Examples of endorsements include adding coverage for a specific valuable item or altering coverage limits for certain liabilities.

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