In this post I will cover an area about homeowners insurance that gets overlooked 90% of the time when folks shop for new insurance. Endorsements.
Why are endorsements overlooked?
My belief is that endorsements are overlooked because they are complicated to understand and they are not front and center when a quote is provided. As most sales folks provide the price as the entry point to their presentation instead of what is and what isn’t covered.
How to read home insurance.
A homeowners policy has 3 sections to it. Understanding this will help you become a savvy insurance consumer that won’t need an insurance broker like us to fighting on your behalf.
- The Application. Where all the facts about your home and you are collected and where you sign that all is CORRECT.
- The Declaration pages. Where the insurance company declares what the maximum amount they are whiling to pay for the covered losses. – Attached to this is an endorsement schedule, this is of upmost importance and it is what I will touch upon in this post.
- The Policy Jacket (your actual insurance policy). These are the rules of coverage. If the Application is 100% correct then the coverage applies but only the coverage mentioned here. Since this part can entail upwards of 100 pages of insurance jargon, it is important to start with the Exclusions section. In the exclusion section you will find what is NOT covered.
Now, to make things a bit more interesting we also have to take into account that there are 2 types of home insurance policies. A traditional home policy that is known in insurance terms as an H03 form and a newer option with more flexibility known as an H05 form. Here is a link to where we briefly talk about these, but it’s basically a list of what is covered (HO3) or we cover it all except this (HO5): H03 vs. H05 Homeowners Insurance – 3 things that are never covered in a home insurance policy are Flood, Earthquake or Mechanical Breakdown but you can always purchase these coverages.
What are the different endorsments?
Endorsements are the specific coverages a policy has on top of normal industry standards. The endorsement will have a name and number to it and further details of each endorsement can be found in the policy jacket. Claims are paid or denied based on the endorsements in your policy.
I’ll briefly explain the most common Homeowners Insurance endorsement below
–Animal Liability coverage is to pay for any injury or property damage caused by your pets. While most might say that you only need this when you have a big dog, I can tell you that most claims associated with pets come from someone being startled and falling because of the pet.
–Building Ordinance & Law coverage is to pay for increases in reconstruction cost due to new building codes. For example: if your home was being rebuilt today due to a major fire, the City where your property is, would require that an interior sprinkler system or fire suppression system be installed in certain areas of your home to meet current year building codes. That cost would be 100% out of pocket if you do not have this coverage on your policy.
–Equipment Breakdown coverage is to cover mechanical breakdown of your home’s systems. Such as heating/air and even some major appliances. Your unendorsed HO policy will not carry this coverage and you can also purchase this as a separate policy. The upside to adding this to your HO policy is that it’s one bill. The downside to adding this to your HO policy is that the claim could affect your total insurance rate.
–Hidden Water/Steam/Leak/Seepage coverage is something new that pays for damage caused by water that has been prolonged because it was hidden from view. An unendorsed HO policy will only cover Sudden and Accidental water losses. Meaning that without this coverage you are 100% responsible for the damage caused inside your walls by the leaking pipe/s.
–Personal Injury coverage is an extension of the Liability that is already included in your HO policy. It extends Liability to then also cover Libel and Slander lawsuits against you, your spouse and under age children living at home. In other words, it is for when you emotionally or financially hurt another with something you said or wrote about them. – This coverage was used by Amber Heard vs. Johnny Depp to pay for her legal fees. Travelers Insurance was the carrier.
–Service Line Coverage is what will help pay for repairing service lines coming into your home. Such as power, gas and water lines that break and cause damage. The damage caused is already covered by the homeowners policy but the repairs of the lines are not covered, and so this Service Line Coverage would be needed to pay for those repairs to those lines. Washout this coverage you would have to deal directly with the utility company that supply & service those lines.
–Water Backup coverage is to pay for damage caused when a sewer line creates a backup to your home and damage is caused to floors, walls and ceiling by the backed up water and sewage. Without this coverage you would be limited to suing the City for that damage caused by water and sewer backups.
Of course each carrier uses their own language/lingo for these endorsements and you might not need to have each one on your policy. But now you understand that not all losses are covered and that endorsements need to be added if you are worried about a specific type of loss.
post written by: Domingo Ramos, Insurance Broker, proudly licensed to transact insurance in California, Oregon, Washington, Idaho, Utah, Nevada, Arizona, Colorado, New Mexico, Texas, Michigan or Missouri. – domingo@tcsib.com