Few things in life remain the same from start to finish. Even your startup company will experience multiple transitions and focus shifts along the way. As a result, you need a commercial insurance policy capable of covering your unique ebb and flow.
Commercial insurance endorsements pack a powerful punch in terms of flexibility. Since they’re saddled with various names (i.e., riders, clauses, etc.), though, endorsements can seem complicated. Here’s what you need to know about commercial insurance endorsements along with a handful of policies we’d recommend.
Imagine your startup as a massive skyscraper in a bustling metropolis. As it defeats gravity by swaying with the wind, its primary purpose is to remain upright.
However, to accomplish this task, the builder must construct the tower with optimal material. In terms of your company, endorsements are the “optimal material.” Here’s what we mean.
What Is an 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.
When Do You Need One?
If you don’t anticipate any change concerning your company whatsoever, then you do not need endorsements. 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 They Important?
Because endorsements empower your business to transform, they are vital to startups 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.
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. Not only do they bolster your professional confidence, but endorsements give you the space you need to welcome growth.
Who Asks for Them?
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.
Plenty of endorsements exist, but following are a few of the most common:
- 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 endorsements:
General Liability Endorsements
- Adding or changing a location
- Increased limits
- Additional insured
Directors & Officers 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 endorsement, changes in deductible covers the spectrum instead of remaining dedicated to one policy. Therefore, it applies to any policy type.
How Much Do Endorsements Cost?
As with most business items, the cost 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, and we work to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right endorsements for you.
Want to know more about commercial insurance endorsements? Talk to us! You can contact us at firstname.lastname@example.org or create an account here to get started on a quote.