The car insurance industry is filled with unfamiliar lingo. Car insurance endorsements play a crucial role in the industry – but many drivers are unaware of how they work or what they are. Today, we’re explaining what auto insurance endorsements are and how they work.
What is an Endorsement?
Endorsements can be found across the insurance industry. In the world of insurance, an “endorsement” is a change to the existing coverage in your policy.
An endorsement might “change” your policy by adding or removing coverage, for example. Some endorsements give you more coverage. Other endorsements restrict coverage. Generally speaking, endorsements work in one of three ways:
- They increase or expand coverage on your car insurance policy
- They limit or delete coverage of a car insurance policy
- They add or delete people on a car insurance policy
One of the most important things to know about a car insurance endorsement is that the endorsement overrules anything written in your policy. The endorsement supersedes the rest of your policy for as long as the endorsement is active.
You can purchase car insurance endorsements to add them to your policy. Next, we’ll talk about some of the most popular endorsements you can purchase from most major insurance companies.
Most Popular Auto Insurance Endorsements
Some of the most common car insurance endorsements include:
Waiver of Depreciation
Many car insurance companies allow you to buy a waiver of depreciation for your brand new vehicle. If you purchase this waiver, then you’ll be covered for the full purchase price or the manufacturer’s suggested retail price (whichever amount is lower) if your vehicle is stolen or damaged beyond repair.
If you don’t have a waiver of depreciation on your car insurance policy, then you’ll only receive the depreciated value of your vehicle after your car is “totaled”. This depreciated value may not be sufficient to buy a brand new vehicle.
You may have heard that your new vehicle loses 10% of its value when you drive it off the dealership’s lot. A waiver of depreciation can be added to your policy to ensure you get maximum value for your vehicle after a collision. If you have a new vehicle and want to maximize your protection, then you may want to consider buying an auto insurance endorsement that waives depreciation.
Coverage for Transportation Replacement or Rental Cars
If your car is damaged and needs repairs, then you may be unable to drive it for several weeks. Some car insurance policies automatically cover the cost of renting a vehicle. Other policies do not. If you want to ensure your rental vehicle is covered, then you may want to add an endorsement for coverage for transportation replacement. In this case, you’re never stuck paying for a car rental replacement vehicle out of pocket.
Insuring a Vehicle to Stated Value
The true value of an antique or specialty vehicle may be higher than the actual cash value. If you own a classic car, for example, then the actual cash value of the car may be much lower than its stated value. Unfortunately, your car insurance company only agrees to cover the actual cash value of the vehicle – not its stated value.
Some classic car owners will order a professional appraisal for their vehicle, then purchase an endorsement that insures the vehicle to its stated value. With this endorsement, you can insure your vehicle up to the amount specified by a professional appraiser.
Legal Liability for Damage to Non-Owned Vehicles
If you don’t have your own car and you frequently drive someone else’s vehicle, then you may want to add the above endorsement to your auto insurance policy. This endorsement, also known as the “rental vehicle insurance endorsement,” extends your liability coverage to protect you when driving someone else’s vehicle.
Generally, this endorsement covers you when driving any vehicle (legally) in the United States or Canada.
By purchasing this car insurance endorsement, you can typically avoid buying the optional coverage from the rental car company.
Use of Recreational Vehicles by Unlicensed Operators
If you’re buying an insurance policy for an RV, an ATV, or a snowmobile, then you might consider adding an endorsement for use of recreational vehicles by unlicensed operators.
Under this endorsement, certain unlicensed drivers can still operate your recreational vehicle while remaining covered. Anyone under 16 years of age is typically covered by this policy, for example, as are operators who are unlicensed.
Surprisingly, most insurance companies don’t charge to add this endorsement to your policy. If you have younger kids interested in driving your recreational vehicles, then you might want to add this endorsement to your policy.
How Long Do Insurance Endorsements Last?
Once you buy an auto insurance endorsement, that endorsement becomes part of your legal insurance contract. It remains valid and enforced until your policy expires.
The only time an endorsement expires is if there’s a specific expiry date attached to the endorsement. An endorsement might include terms that it stays active from January 1, 2018 to June 1, 2018. Typically, however, insurance endorsements last as long as your car insurance policy.
Auto insurance endorsements can add or restrict coverage of an existing car insurance policy. You can add endorsements mid-term. Or, you can add an endorsement when you purchase your car insurance policy. Your premiums may change after adding an endorsement. If you want to add an endorsement to your existing car insurance policy, then speak with your car insurance company or compare quotes online today.