Home Insurance Policy Endorsements

Home insurance policies are generally written for the broadest market possible. The basic policy is merely a boilerplate upon which more specific pieces are added. For instance, most people don't have a home business, so this isn't included in a normal policy. That type of coverage would have to be added. These added pieces are called "endorsements" or "riders." There are several different types of endorsements (more than 100) that can make up a home insurance policy.

Inflation guard endorsement - If a home is not insured for at least 80% of its value, a penalty will be applied, causing the policy owner to receive less than the replacement cost under their policy if they have a loss. To prevent this, the homeowner can purchase what is called an inflation guard endorsement. With this endorsement, the amount of the insurance is increased annually by an amount that the homeowner chooses (pro-rated). This amount is generally 4% to 6%. So, if a home is insured for $100,000 plus a 4% increase, for example, the insured would be eligible for $104,000 after a year of making payments.

Personal property endorsement - A homeowner can also purchase a scheduled personal property endorsement. This endorsement covers a specified property such as an item of jewelry or other valuable. The payout for a loss such as theft is equal to an amount agreed upon by the insurer. If a $5,000 necklace is stolen, the insurance company will pay out $5,000 with no deductions made for depreciation and without requiring a deductible.

A similar endorsement is called personal property replacement cost. A standard home insurance policy pays the actual cash value for any damaged or stolen personal property. Because of depreciation, actual cash value is always significantly less than the replacement cost. With a personal property replacement cost endorsement, a homeowner can remedy this issue by receiving the actual cost to replace any item that is lost or damaged, such as furniture, electronics, etc. regardless of the item's value at the time of the loss.

Personal injury endorsement - Another common endorsement is the personal injury endorsement. Even though a standard home insurance policy covers bodily injury and property damage, it does not cover personal injury, or injuries which don't affect the body. These types of non physical injuries include false arrest, wrongful eviction or entry, invasion of the right of privacy in a room or dwelling, slander and defamation, or the violation of a person's right to privacy. The personal injury endorsement also covers any liability that arises from a personal injury, such as legal fees or damages.

Earthquake endorsement - A less common endorsement (because it depends on the region in which your home resides) is an earthquake endorsement. Earthquake endorsements cover not only earthquakes, but similar events such as volcanic eruptions, landslides or any other type of earth movement. A standard earthquake endorsement has a deductible equal to 5% of the coverage for the main residence, with a minimum deductible of $250. Higher deductibles can be chosen by the policy owner to reduce the cost of the premium. In states with a relatively high frequency of earthquakes such as California, the deductible can be much higher - from 10% to 25%.

There are several other endorsements out there which apply to home insurance policies. These are merely a few of the more common ones. Speak with your insurance professional to determine which ones make the most sense for you and which endorsements will work within your budget.