The Complete Guide to Commercial Insurance Endorsements

What Is a Commercial Insurance Endorsement?

A commercial insurance endorsement empowers your company to change while still offering protection. It’s an attached document that becomes part of your insurance policy, altering the way your plan works.

For example, any changes made to the boilerplate policy the carrier files with the state regulators is accomplished via endorsements. Alterations might include:

• Changing the business address
• Adding a new line of coverage
• Excluding coverage for a specific exposure

Endorsements enable you to make these changes without the risk of losing coverage. 

Examples of Commercial Insurance Endorsement

Some examples of commercial insurance endorsements include:

• Industry-Specific Enhancements: These endorsements add coverages specific to certain industries that are not typically included in standard forms.
• Additional Insured Endorsements: Common across various industries, this endorsement extends liability coverage to individuals or entities beyond the named insured, such as subcontractors or clients.
• Hired & Non-Owned Auto: This endorsement provides coverage for auto-related accidents when a business does not own vehicles but employees use personal vehicles for work-related tasks.
• Protective Safeguard Endorsements: These endorsements require maintaining specific protective features like sprinklers or alarms; failure to do so may lead to non-payment of claims related to those safeguards.
• Accounts Receivable Endorsement: Added to commercial property coverage, it protects against financial losses due to damaged or destroyed accounts receivable records.
• Electronic Data Processing (EDP) Endorsement: Typically added to a Business Owner’s Policy (BOP), it covers data loss due to incidents like power surges, fires, or natural disasters.
• Data Breach or Cyber Liability Endorsement: This endorsement covers costs related to data breaches, cyberattacks, identity theft, and compromised data, providing essential protection for small businesses against cyber threats.

These examples showcase how commercial insurance endorsements can be tailored to meet the specific needs and risks of businesses, enhancing their insurance coverage effectively.

When Would You Need Commercial Insurance Endorsements?

If you don’t anticipate any change concerning your company whatsoever, then you do not need any commercial insurance endorsement. However, if you’re like the rest of us and foresee business transformation and professional growth, commercial insurance endorsements should be on your radar.

In short, an endorsement allows for a policy change. So, if you need to add coverage or increase coverage limits, for example, you will need an endorsement. 

Why Are Commercial Insurance Endorsements Important?

Commercial insurance endorsements are important because they empower your business to transform. They are vital to start-ups during any phase of business (novice, mid-level, expert, etc.).

Let’s face it; transformation is part of the deep dive into the entrepreneurship ocean. Ideas change, people leave, and the finish line consistently moves (or disappears altogether). Momentum is your friend—even when you need to modify the scope of your business insurance coverage, including D&O insurance.

Endorsements are an added provision that modifies your policy’s terms and conditions. They help to keep your company protected while allowing you to make policy changes according to your need. An insurance policy audit can ensure these endorsements are effectively integrated, further bolstering your professional confidence and giving you the space you need to welcome growth.

Is Commercial Insurance Endorsement Required by State Law?

Some state law requires specific endorsements. A prime example of a state-mandated endorsement is the cancellation condition, which is an endorsement in many standard general liability policies. Often, it insists the insurance company notifies the policyholder 45 to 60 days ahead of a pending cancellation, instead of the typical 30 days. Other similar endorsements work by not allowing the insurer to cancel a policy.  

Also, the Insurance Services Office (ISO) frequently dictates commercial insurance endorsements according to its rules and regulations. In this case, underwriting typically calls for a specific endorsement on policies that provide a particular coverage. 

Aside from mandatory endorsements, sometimes it’s best for the company when you choose an endorsement voluntarily. Most commercial insurance endorsements tag onto a general liability policy. For example, a well-known endorsement such as this is a liquor liability.

Common Commercial Insurance Endorsements 

Plenty of commercial insurance endorsements exist, but following are a few of the most common commercial insurance endorsements found in an insurance plan:

• Adding or changing a location. This endorsement covers any modification to the insured’s property such extending your office space into the adjacent building or moving your warehouse to a new location.
• Additional insured. As imagined, this endorsement adds another individual or entity to the policy. Common added insured are consultants, landlords, and contractors.
• Increased limits. Sometimes, companies need to add endorsements to increase the limits. For example, you’d use an endorsement to extend workers’ compensation benefits not covered by state law. Or, you rent the space next to your current office to expand your team’s work zone.
• Changes in deductible. This endorsement involves who can change your deductible as well as when and how much it can be changed.
• Editorial / administrative changes. Freshly-published policies can include mistypes, misspellings, or missing words altogether. To correct the error, the insurer would add an endorsement. If a policyholder experienced a name change, an endorsement would amend this, as well. 

Following are a few common policy-specific commercial insurance endorsements:

General Liability Endorsements

• Adding or changing a location
• Increased limits
• Additional insured

Directors & Officers (D&O) Endorsements

• Administrative changes, such as mailing address
• Removal of an exclusion (i.e., If the policy started with a major shareholder’s exclusion and the insured fixes their set up so that all owners with more than x% ownership have board rep, then we can endorse the policy to remove the exclusion)

Cyber Liability Endorsements

• Increased limits
• Administrative changes, such as mailing address

Another significant endorsement for property policies is loss payee and lender loss payable. These endorsements concern rented property and the bank loan on the property (i.e., renting equipment).  

Unlike other endorsements, changes in deductible covers the spectrum instead of remaining dedicated to one policy. Therefore, it applies to any policy type.

What Is Retention in Insurance?

In the realm of insurance, retention in insurance takes on the role of signifying the segment of risk that an insured party opts to shoulder or manage autonomously, rather than relinquishing it entirely to the insurance company. This calculated choice serves as a strategic manoeuvre for businesses, aiding them in effectively handling their own risk – akin to a form of self-insurance, particularly when considering the concept of a risk retention group.

How Much Do Commercial Insurance Endorsements Cost?

As with most business items, the cost of commercial insurance endorsement premiums is likely at the forefront of your mind. Here’s the inside scoop on premiums.

For additional insured (AI), the cost can range anywhere from $100 to $500, depending on the type of AI endorsement. Blanket AI means the insured can add as many AIs as they need—which often nears the $500 mark. For individual AIs, the cost typically runs at $100. 

Often, we can add AIs for no premium if they’re typical business partners such as lenders or landlords.

Increase limits depend solely on the increased amount, type of coverage, and level of exposure. Although we’d be thrilled offering more solid numbers, each of our clients have unique situations. So, it’s impossible to give a range without knowing specifics.

Adding new locations to a general liability or property policy will typically be additional premium (AP). However, for new locations on any other type of policy, no AP will likely exist. Of course, a change in mailing address will result in no AP.

As your company develops, it can be tricky determining which endorsements will serve you best. Founder Shield specializes in knowing the risks you face at each stage of development. We’ll provide a real-time breakdown of your current risks and future insurance needs. Schedule a 360 Risk Assessment today!