What is insurance endorsement? Understand everything about it
What is insurance endorsement?
The endorsement is the name of the document issued by the insurer during the application of the policy that proves any change in the conditions of a contract. These modifications can be warranty changes, such as moving the vehicle or machine, transferring ownership, selling a car or motorcycle, etc.
Any change to one of the terms present in the contract requires a subsequent endorsement to update it. Otherwise, it is not possible to trigger coverage in the event of an accident.
For this reason, it is also known as an addendum to the insurance contract. Some of the main changes and modifications are often:
- Contractor data (address, CPF, CNPJ, etc.)
- change in the object of insurance (vehicle, house, etc.)
- inclusion or exclusion of coverage (going from basic to full insurance or vice versa);
- increase or decrease in the maximum indemnity limits (according to changes in internal matters of the insurer or external of the insured);
- exchange of payment data (automatic debit, bank slip, etc.)
In summary, the endorsement rectifies the So Clean insurance contract and updates it.
What is the purpose of the insurance endorsement?
In summary, the endorsement rectifies the insurance contract and updates it. This ensures that the policy matches the policyholder’s actual situation to protect him or her in the event of a claim.
Insurance is a transfer of liability from the contractor to the insurer under the terms of the contract.
And the endorsement is the update of the terms and the commitment signed, whether for the protection of equipment, property, legal obligations, or obligations of a contract.
For example: changing the business address requires communication with the insurer because, in the event of a harmful event with loss, the indemnity may not be released.
Likewise, it makes no sense to maintain the insurance contract for a car that has been sold. With the endorsement, it is possible to keep the same plan and change the vehicle, although there may be adjustments in the values according to the characteristics of the new car.
It is important to keep in mind that, to endorse correctly, it is necessary to speak with the insurance brokerage so that they can carry out the quote with the insurer and, after validation, issue the proposal for amending and rectifying the document.
How does endorsement work?
The moment the insured/contractor, or decision-maker, informs the broker about the need for rectification, the procedure is initiated.
From there, the broker makes the quotation, presents the proposal for validation by the client, and, after approval, issues the proposal for acceptance by the insurer.
After that, the insurer has up to 15 days to accept the application and issue the endorsement. In summary, the steps are the same as for issuing the policy:
- Quotation: verification of risk reduction or aggravation for consequent collection or return of premium (in the case of exchanging a vehicle, for example, it is quite common);
- Proposal: formalization of the contracting party’s request to the insurer for analysis of acceptance or refusal;
- Issuance of the endorsement: occurs within 15 days of receipt of the proposal.
At the proposal stage, a prior inspection or new risk inspection may be required, depending on the type of endorsement requested and the policy in force.
When there is an exchange of the insured object, this is usually more common, but it can also be required at the time of inclusion of coverage (to avoid fraud) and increase the limits covered by the contract.
If the endorsement is not feasible and the insurance company denies the change, the insured can carry out a new contract, canceling the previous policy.
When to make the endorsement?
For clarity, let’s see some practical examples below. First, however, it is worth remembering which contractual terms require endorsement:
- Address change;
- New vehicle circulation or parking place;
- Registration of new-vehicle drivers;
- Inclusion or exclusion of coverage;
- Change of overnight zip code (for vehicles);
- Inclusion of new people (health and life insurance);
- Replacement of insured object (machines or automobiles);
- Change of fuel (installation of the gas kit, for example, for automobiles).
These are just a few possibilities. If you want to know more about how to carry out an insurance endorsement, talk to our team.
Example of endorsement in Rental Guarantee Insurance
Imagine a property owner who puts the place up for rent. In order not to take risks, this owner takes out a Rental Guarantee Insurance policy and ensures that the lessee’s obligations are met. In case of default, the insurance clauses prevent the loss.
When carrying out the quotation with the broker, the owner awaits the analysis and approval of the insurance company according to the increase in value, when necessary, and other terms of the Rental Guarantee Insurance, such as condominium, water, electricity, IPTU, gas, contractual fines, damages to the property and painting.
Suppose that, in the beginning, the owner of the property has acquired only the basics: rent, condominium, and IPTU. After a few months, however, it becomes necessary to expand coverage so as not to suffer significant losses in the event of problems.
That’s where the endorsement of coverage for water, electricity, gas, contractual fines, and all the rest comes in.
Example of endorsement in Advance Payments Guarantee Insurance
This is another common cause of endorsement. The advance payment guarantee insurance is widely used in companies in the civil construction, supply, and provision of services.
Consider that a company hires a contractor to carry out work. For the construction to start, it is necessary to pay 30% of the total value of the service.
The Advance Payments Guarantee Insurance policy guarantees that the amount will be used for this purpose.
Now, if more than one amount is requested (20% in the middle of performing the service), it is necessary to use the endorsement to change the insurance.
Thus, it is recorded in the contract that there was a supplement of value and that the amount must also be used for the execution of the contractual object.
Does insurance endorsement have a cost?
The insurer stipulates coverage for each type of risk contracted, and each of these has an assigned monetary value.
Thus, in case the insurance is endorsed for a change in coverage, the parameters, conditions, and premiums in force on the date of amendment of the insurance contract are calculated.
In this case, with the rectification, some endorsements may generate readjustments in the conditions, franchise values , and contracted premiums.
To know the details, it is important to speak with your insurance broker at the time of the quote, as there is a possibility of a refund or additional charges.