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Endorsements and floaters are two ways policyholders can address homeowners insurance limits and exclusions that might leave them vulnerable. Standard homeowners insurance policies are specific in the types of coverage they extend, and how much belongings are insured for. This leads to gaps in coverage, and insufficient value insured. Endorsements and floaters help to secure additional monetary coverage and protection for homeowners' property and belongings.
Endorsements vs. Scheduling a Floater
What is an insurance endorsement? Endorsements (also called riders or options) allow you to raise the overall limit for certain categories of items. You effectively "buy" additional coverage and protection, and your insurer will reimburse you up to those raised limits. They are the cheaper of the two solutions because although the overall limit might be raised, typically an existing limit per item remains.
What is a scheduled floater? Scheduling individual items with what are sometimes called "floater" policies is more expensive, but allows for higher limits per item. Any single valuable that would exceed its category limit by itself is a good candidate for a floater. Floaters also provide more comprehensive coverage and allow claims such as accidental loss - which homeowners insurance will not cover.
Here’s an example of how endorsements and scheduling differ. Say you have two rings, each valued at $2,000 and both need to be covered (a combined value of $4,000). If your policy's standard per-item claim limit in $2,000 and your overall limit for jewelry is $2,500, your second ring would not be completely insured. You should purchase an endorsement and increase your overall limit to $4,000 to cover both rings. If you have only one $10,000 ring, increasing your overall claims limit won’t help you because endorsements have limits per item. Some insurers might not even allow you increase an endorsement to that high of an amount. But if you schedule the $10,000 ring with a floater policy, you are specifically insuring that item for its appraised value, which would sufficiently cover it.
Types of Endorsements & Floaters
We’ve broken down some of the most common and obscure endorsements and floaters below.
Sewer and Drain Backup: Also called "water backup," a backed-up sewer or drain can cause significant damage to a home. It is frequently excluded from homeowners insurance policies and is not covered by flood insurance policies. If your policy does not include sewer and drain backup, you should consider purchasing the endorsement - especially if you have a basement with a sump pump. If a pump is overwhelmed by a heavy rain or were to stop working, there is potential for a lot of damage to the basement and whatever is kept there. Adding the endorsement is almost always a nominal annual cost of about $40-$50. If you have a sump pump, this is coverage you should purchase.
Jewelry, Furs and Similar Valuables: Since jewelry, furs, watches, electronic equipment and other high-value items can be easily stolen or lost due to a peril, most policies have an overall claim limit between $1,000 and $2,000. Considering jewelry in particular, a $2,000 limit is not very high. If your items in the category have a total value greater than your overall limit (especially if it’s only a few items that represent that value) then you should purchase an endorsement. Remember that policies have limits per item as well, so if your overall claim limit is exceeded by one item you should schedule it with a floater policy.
Sports Equipment and Musical Instruments: Like other categories, sports equipment and musical instruments have per-item and overall claim limits, respectively. The limits are typically anywhere from $500 to $2,000. Make sure you consider everything you own that might fall into one of these categories. A couple baseballs will not put you over the claim limit for sports items but one set of golf clubs might. When it comes to instruments, a harmonica might not be something you’re too worried about but an individual violin, guitar or piano could easily be valued beyond the typical limits that insurers set by default.
Sinkhole Coverage: This endorsement covers direct physical loss or damage to insured property caused by "sudden settlement" or a sinkhole. Homeowners insurance policies sometimes cover "catastrophic ground cover collapse" but the event might have to meet a list of criteria to fall under the policies coverage. Earthquake insurance explicitly does not cover sinkholes or any damage to land, including large cracks or holes that appear on your property. A sinkhole endorsement effectively covers sinkholes that don’t meet all criteria for homeowners policies and the exclusion in earthquake insurance. Sinkholes are rare but some states, like Florida, are more susceptible to them than others. If you live in an area with a history of sinkholes, you should consider purchasing this endorsement.
Identity Theft: More formerly known as identity fraud expense coverage, this endorsement protects against identity-related crime. These endorsements on policies are growing in popularity as the number of identity theft crimes increases. Javelin Strategy & Research found in 2009 that more than 11 million adults in the U.S. had been victims of some form of identity crime with an aggregate loss of $54 billion.
This protection is different from other insurances. It’s really a reimbursement insurance for the cost of services to repair your identity. For example, say you are a victim of an identity crime and someone makes a fraudulent purchase with your credit card. The credit card company should expunge the fraudulent charges without any expense to you. However, if you need to defend any lawsuit brought against you by merchants, financial institutions or collections agencies, this endorsement would reimburse you for that cost.
Inflation Guard Endorsement: An inflation guard endorsement automatically periodically increases the coverage limit on a home to account for inflation. Although coverage increases over the course of a policy period, the resulting higher premium is not usually billed until time of renewal. The majority of insurers already have this feature built into their homeowners insurance policies. For example, when you go to renew your policy you’ll notice your coverage limit and premium will be slightly increased. Regardless of whether inflation protection is part of a policy or an endorsement, homeowners insurance policies should be reviewed annually. That review should take into account inflation as well as other changes such as the need to add other endorsements or schedule individual items.
Assisted Living Care Coverage: This is a special endorsement offered by few insurance companies because of its infrequency of use. For that reason, it is not coverage most people need. It covers the expenses of an assisted living facility for a relative of the insured by blood, marriage or adoption that is not a member of their household. It also provides expense coverage for the relative up to certain limits for things including hearing aids, eyeglasses, contact lenses, false teeth or dentures, a medical-alert device, walking aids and wheelchairs while they are staying at the facility. It does not cover hospice care.
Boats and other watercraft: Boats and other watercraft are not usually protected once they are on the water or if they are not on the premise of the policyholder's residence. Watercraft is also sometimes excluded from homeowners insurance liability coverage, which is why this endorsement exists. It provides liability and medical payments coverage for motor watercraft with more than 25 total horsepower and longer than 26 feet in length (including sailing vessels).
Yard and Garden: This endorsement extends coverage and increases the limit for landscaping and tools. Trees, plants and riding lawn mowers are all examples of things covered by the endorsement. For many policyholders, the coverage already provided might be sufficient. However, if your property has extensive landscaping and foliage you should consider this endorsement. Remember that this endorsement has an overall claim limit and likely has limits per item. If you have a particular tree, plant or item that you need to cover, you might have to schedule it.
Refrigerated Property Coverage: This coverage protects the contents of freezers and refrigerators in the event electrical service to a device is interrupted. Interruptions caused by damage to the power transmitter (on or off premises) or mechanical failure are covered. The endorsement usually has a low limit and a deductible. Unless you’re someone who has an atypical number of things stored in freezers or refrigerators, you generally don’t need this coverage.