What are endorsements in homeowners insurance?

What are endorsements in homeowners insurance?


1. Section I Endorsements

The homeowners policy is designed for use by the average homeowner.

 Many homeowners, however, have special needs. To meet these needs, there are numerous endorsements that can be attached to the homeowners policy to modify coverage under Section I or Section II.

The scheduled personal property endorsement provides a separate schedule of insurance for one or more of nine major categories of valuable property.

What are endorsements in homeowners insurance?

Many of these items represent property that has only a limited amount of coverage under the homeowners policy.

 The endorsement allows the insured to separately schedule one or more of these major categories of property with a separate amount of insurance for each category scheduled. After the insured schedules items of personal property on this endorsement, the property is not subject to the coverage limitations that apply to unscheduled personal property under the homeowners policy. 

In addition, coverage is provided on an open peril basis with no deductible, even if the endorsement is attached to a named perils homeowners policy. 

Depending on the type of property scheduled, losses may be paid on an actual cash value, market value, repair or replacement cost, or value basis. 

If the insured and the insurer do not agree on the amount of loss, either party may make a written request for an appraisal of the loss. 

When this occurs, the insured will select and pay a competent and impartial appraiser; the insurer will select and pay a competent impartial appraiser. 

The two appraisers will select an umpire. Each appraiser will state the amount of loss. If the appraisers do not agree, they will submit their statements to the umpire. 

The insured and insurer will equally share any appraisal expenses and the expense of the umpire. Agreement by the umpire and either of the appraisers will be binding.

The personal property replacement cost endorsement provides that the policy will reimburse losses to personal property on a replacement cost basis, rather than actual cash value, in the same way that homeowners forms reimburse loss to dwellings and other structures. 

Some property is excluded, such as obsolete articles, antiques, fine arts, and paintings that cannot be easily replaced.

The permitted incidental occupancies endorsement overrides the exclusions under the homeowners forms that apply to the insured’s business activities conducted on the residence premises. 

For instance, this endorsement eliminates the Coverage B exclusion for using an other structure for business purposes. 

It also eliminates the $2,500 limit for business property on the residence premises with regard to furniture, supplies, and equipment used in the business listed in the endorsement. It also eliminates the Section II exclusion of liability and medical payments coverage in connection with business pursuits for the described business.

None of the homeowners forms covers earthquake. To add earthquake as a covered peril, the insured must purchase an earthquake endorsement.

Finally, the insured may purchase the home day care coverage endorsement to extend homeowners coverage to this type of business. 

The premium for this coverage is based on the number of children the insured cares for.

2. Section II Endorsements

There are also a number of homeowners endorsements that affect Section II.

Remember that the homeowners forms provide only limited liability coverage for watercraft. With the watercraft endorsement, an insured can purchase coverage for:

watercraft up to 26 feet long powered by outboard engines or motors exceeding 25 horsepower;

168 Property and Casualty Insurance License Exam Manual

watercraft powered by inboard or inboard-outdrive engines or motors; and

sailboats more than 26 feet long.

An unendorsed homeowners policy provides no coverage for liability arising out of business-related perils, other than for permitted incidental occupancies. 

The business pursuits endorsement provides liability coverage for a business conducted away from the residence premises.

The homeowners policy provides no protection against personal injuries such as libel, slander, false arrest, invasion of privacy, or malicious prosecution.

 The personal injury endorsement modifies the definition of bodily injury to include personal injury.

3. Limited Fungi, Wet or Dry Rot, or Bacteria Coverage

This endorsement adds coverage to the property or liability sections of the policy for property damage and liability losses arising out of fungi, wet or dry rot, or bacteria. 

It is used only with the HO-3 and HO-5. 

The limits for the coverages are scheduled in the endorsement.

Fungi are defined as any type or form of fungus, including mold or mildew. 

Under Section II, the definition does not include fungi that are on or part of a good or product intended for consumption. 

Bacteria and wet or dry rot are not defined.

For purposes of simplification, we will use the word mold in this section.

Under Section I, this coverage is added to the additional coverages section.

 It states that the amount shown in the schedule is the most the insurer will pay for:

all loss payable under Section I caused by mold;

cost to remove mold from covered property; and

cost to tear out and replace any part of the building or other covered property as needed to gain access to the mold.

Coverage only applies if the loss or costs resulted from a covered peril that occurred during the policy period.

 The insured must have used all reasonable means to save and preserve the property from further damage when the covered loss occurred.

The amount shown in the schedule is the most the insurer will pay for losses under this additional coverage, regardless of the number of locations insured or the number of claims made.

 This coverage does not increase the policy limit that applies to the damaged covered property.

Under Section II, the limit of liability condition is modified to state that the insurer’s total liability under Coverage E for all damages arising directly or indirectly out of the actual, alleged, or threatened contact with mold will not be more than the sublimit for this coverage shown in the schedule.
 The sublimit does not increase the Coverage E limit and applies separately to each consecutive annual period

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