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Endorsements and foaters are two ways tenants can make sure their renters insurance adequately covers them. Like homeowners insurance, renters insurance has limits and exclusions within policies and endorsements and floaters enable renters to address areas where they might be vulnerable. No matter the amount of personal property coverage a tenant purchases, their renters insurance policy will still include limits for specific categories. This guide explains in detail the limits that renters need to be aware of and endorsements and floaters they might need to consider when shopping for a policy.
Endorsement vs. Scheduled Floater
What is an endorsement? Endorsements (also called riders or options) allow a policyholder to raise the cliam limit of a specific category, such as jewelry or sporting equipment. It is effectively purchasing additional coverage for personal property that the insurance company views as unusually valuable. Endorsements or riders are genrally cheaper than scheduled floaters because they typically only increase the limit of a category.
What is a scheduled floater? A scheduled item, sometmes called a "floater" policy, extends coverage for a specifc item or collection, versus an entire category. Any single item with a value that exceeds its category limit is a good candidate for scheduling. Floaters also tend to provide more comprehensive coverage and can cover claims such as an accidental loss, which a standard renters insurance policy would not cover.
Examples of Endorsement vs. Floater: Say a renter owns two rings, each valued at $2,000 and both need to be insured (a combined value of $4,000). Most renters insurance policies have an overall claim limit for jewelry and furs of $2,500 so the standard policy would cover a valid claim for one of the rings, but only part of the cost of other. In this scenario, an endorsement could increase the claim limit of the jewlery category past the total value of rings and effectively covering them in the event of a loss.
But what if one ring was worth $1,000 and the other was worth $10,000? In this case, scheduling the $10,000 ring would be necessary to fully insure it. The reason is insurance policies have claim limits per-item within categories that are usually below the category limits. Per-item limits within categories differ between companies but if the per-item limit in this case was $2,000 an endorsement wouldn't help the insured. If the more expensive ring was lost, the insurance company would only pay up to $2,000 for the $10,000 ring. Scheduling the $10,000 ring for its appraised value would fully insure it, no matter the category limit for jewlery and furs associated with that renters insurance policy.
Types of Endorsements and Scheduled Floater Policies
Here are a list of riders commonly offered by insurance companies. In most cases, single items within any of the categories can be scheduled and covered with a floater policy.
Sewer and Drain Backup: A backed-up sewer or drain overwhelmed by heavy rain, or one that stops working, can cause significant damage to a home and personal property. A landlord or owner might purchase a sump pump to prevent overflow in a home but if the system is not tended to by the renter, the renter could be responsible for any damage it causes to the property. Renters are also reposonsible for their own personal property, which could be damaged in a water backup.
Even the top companies frequently exclude this coverage from renters and homeowners insurance policies (it's also not covered by flood insurance). If a tenant is renting a single-family home and responsible for the property's sump pump, adding the endorsement is a good way to protect personal property near the pump. Adding the endorsement usually only costs about $40-$50 per year. If there is a sump pump in a building with mutliple units, the landlord or superintendent should be responsible for it and tenants would have no need for this endorsement.
Jewelry, Furs and Similar Valuables: Since jewelry, furs, watches 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.
Electronic Equipment: Televisions, stereo systems, media playing or recording devices (such as an Apple TV), DVDs, projectors and video game systems are all examples of property that fall under the category of electronic equipment. Unlike most categories, the claim limit for electronic equipment sometimes is not a set dollar amount. Instead, the limit might be a percentage of the renters insurance policy's total personal property coverage. Policies usually coverge up to 10% of the total personal property limit.
For example, say a renters insurance policy covers up to $30,000 of personal property. Assuming claims for electronic equipment have a limit of 10% of that coverage, that would cap any payout at $3,000. The value of a typical television, Apple TV and laptop computer could easily be more than that amount, so a lot of renters should consider expanding this category's limit.
Sports Equipment and Musical Instruments: Sports equipment and musical instruments have per-item and overall claim limits like other categories. The limits are typically anywhere from $500 to $2,000. The most important thing for renters to do is make sure they consider everything they own that might fall into this category. A bucket of baseballs and a bat probably aren't worth the deductible but one set of golf clubs might be. 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 well beyond the standard limit of a policy.
Collections: Some renters and homeowners insurance policies have this category, which typically includes but is not limited to baseball cards, comic books, albums covers and other memorabilia. For the stated value of a collection to be covered, policyholders need to have a collection valued by an appraiser. All collections also fall under this category and the endorsement, so the limit should be set assuming a total loss of everything under the category. The likelihood of a fire or theft affecting some and not all collections is probably low.
Earthquakes: Renters insurance does not protect personal property damaged by an earthquake. To cover those damages, a policyholder can add an earthquake endorsement. This endorsement will not cover sinkholes or any damage to land, including large cracks or holes that appear on your property. Some renters insurance policies might not offer an earthquake endorsement. In that case, a policyholder interested in the coverage can purchase a separate earthquake insurance policy.
Sinkholes: This endorsement covers direct physical loss or damage to insured property caused by “sudden settlement” or a sinkhole. Renters and homeowners insurance policies sometimes cover “catastrophic ground cover collapse” but the event might have to meet a stringent list of criteria to qualify for coverage. 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, such as Florida, are more susceptible to them than others. Anyone who lives in an area with a history of sinkholes should consider purchasing this endorsement.
If a renters insurance policy does not offer a sinkhole endorsement and the policyholder wants the coverage, they can always purchase a stand-alone sinkhole insurance policy.
Identity Theft: Identity fraud expense coverage protects against identity-related crime. Some renters insurance policies include some coverage for identity crimes but an endorsement can increase the limit. These types of 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.
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 renters policies, 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).
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.
Riders That Don't Apply To Renters
Some endorsements cover a category within an insurance policy that doesn't apply to a renter. We've listed some of those and explained why below.
Inflation Guard Endorsement: An inflation guard endorsement automatically periodically increases the coverage limit on a home to account for inflation. Since renters don't own the dwelling they occupy, they have no need for this endorsement. However, a property owner might want to consider it. In fact, some insurers include this feature in their homeowners insurance policies from the start.
Yard and Garden: This endorsement increases the claim limit for landscaping and tools which many renters don't have. The exception might be some tenants who rent single-family homes and are responisble for the upkeep of a property because in addition to trees and plants, the endorsement would cover a lawnmower. If a renter has a roof garden they might consider extending the coverage or scheduling a particular tree, plant or landscaping featuring such as a fountain.