Endorsements Explained! What are They, and How Do They Work?
What are endorsements? How do they work? And why do insurance companies use them? Learn everything about endorsements from this week’s educational post for public adjusters.
This Wednesday, Jeromy Leavelle, our commercial claims coach, shared his understanding of endorsements in the YouTube video.
You may wonder what is so special about endorsements. They are just additions to the claim, right?
👉 Can add more value but also limit the policy.
👉 Have a significant impact on your estimate.
👉 Can make or break your claim.
Thus, understanding endorsements is a crucial part of every successful claim process. And if you want to succeed as a public adjuster, you should become familiar with them.
Which is exactly why you are reading this article.
Now, let’s get into it.
First of all, What are Endorsements, and Why Should Public Adjusters Care?
Endorsements are additions to the claim.
The insurance company might want to limit a policy due to higher risk or extend it as per the client’s wishes. They can achieve both through endorsements.
For public adjusters, it is crucial to understand endorsements can provide more coverage or limit the policy.
For example, your client’s policy could have an endorsement for mold, leakage, or valuables like jewelry and paintings. These are not normally covered in a policy.
So if policyholders want to protect their valuables, the insurance company will add an endorsement to their policy.
However, there are also examples of limiting endorsements like cosmetic exclusion.
Let’s say your client called you because of possible roof damage after a hail storm. After inspecting the roof, you realize enough shingles are damaged that your client will have to replace the whole roof.
After reading the policy, you notice there is a cosmetic exclusion endorsement.
The cosmetic exclusion allows the insurance company to put a cap on all the shingles that are not damaged. The cap can be $10000 or less, sometimes more, but depending on the situation, your client may lack the funds for a full roof replacement.
As you can see, public adjusters should carefully read the policy and endorsements. Otherwise, you could make significant mistakes when estimating the value of the claim!
How does an Endorsement Work?
Insurance companies use endorsements, sometimes called riders, to adjust an existing policy changing its terms and the premium.
Endorsements are often added at the same time when the homeowner signs the policy for the first time. But they can also be added mid-term or at renewal.
Also, endorsements can add or remove people and locations from the original policy.
What does all of this mean for public adjusters?
Firstly, you want to ensure your client has the newest policy with all the endorsements you can read.
Otherwise, you will not know the whole story. And if you are unsure your client has everything, you should call the desk adjuster and check whether the policy you have in your hands is the same as what they have in their system.
Secondly, you should read the policy and endorsements carefully. Attention to detail is crucial when writing convincing proof of loss.
And finally, ensure that everyone covered by the policy is easily reachable by phone or email. Otherwise, you will have a difficult time getting your commission!
Why Do Insurance Companies Use Endorsements?
You might think insurance companies use endorsements to make more money, but there is more to it than simply profit.
Firstly, some endorsements are required by law. For example, if your client lives in a high-risk area and has a government-backed mortgage, they need special endorsements.
Additional water-damage endorsements for areas with flood risk. But also earthquake endorsements if they live in an earthquake-prone area.
Secondly, some homeowners are not required to take endorsements, but they want to protect their homes more effectively, especially if they live in a high-risk area.
And on a similar note, some policyholders have valuables they want to protect but that most standard insurance policies won’t cover.
In such situations, endorsements become very useful!
Different Types of Endorsements Public Adjusters Should Know About
As we have already covered in this post, insurance endorsements can limit or add coverage, and add or remove people and locations.
Besides that, there are standard endorsements insurance companies use to add or change simple things like names or addresses.
Then there are mandatory endorsements for property owners living in high-risk areas. For example, most standard insurance policies rarely cover flood damage.
But if your client lives in an area vulnerable to flooding with a federally backed mortgage, they will need a mandatory flood endorsement.
Another similar example is water and sewer backup endorsements. Water can do a lot of damage to your property, and most policies have a low limit on mold and mildew.
Without a water damage endorsement, such repairs can break your client’s bank!
Key Takeaways from This Post
In this post, you have learned about endorsements, why insurance companies use them, and the most common types you can encounter.
With this knowledge, you should have no trouble finding your way around insurance policies and crafting effective arguments.
So go out there and help homeowners get their houses back in order!
It’s time to take full control of your claims. Of your business. Of your life.
A community can help you get there faster. It can offer support during these tough times. Inspiration. Guidance.
Together, we can get you to where you want to be.
What are you waiting for?