Homeowners insurance endorsements

Several endorsements can be added to a homeowners policy either when the policy is issued or mid-term (usually for an additional premium). Below are endorsements that may appear on a state licensing exam.

Inflation guard

This endorsement automatically increases the amount of coverage on the dwelling and any appurtenant (detached) structures at set intervals after the policy takes effect. The goal is to keep coverage aligned with increases in replacement cost over time.

Business pursuits

This endorsement applies to certain occupations where the insured is an employee (for example, teachers, salespeople, or clerical workers). It extends liability coverage for eligible business pursuits of an insured employee, typically occurring away from the residence premises.

It does not cover most home-based businesses or business activities conducted on the premises. Without this endorsement, liability for BI/PD arising out of eligible business pursuits is excluded.

Permitted incidental occupancies

This endorsement deletes the homeowners policy exclusion that removes liability coverage for business activities on the premises. It allows liability protection when the business activity is incidental to the occupancy of the home (for example, the insured offering piano lessons in the home).

Home day care

This endorsement extends homeowners coverage to include liability protection arising out of operating a home day care business on the insured’s premises. The premium is calculated by head (number of children).

This endorsement specifically excludes liability arising from the following:

• Sexual molestation or abuse
• Injury arising from the use of saddle animals
• Motorized land vehicles or watercraft

(Employee injuries and corporal punishment are also commonly excluded.)

Mobile homes

For exam purposes, some materials reference a Mobile Home endorsement that modifies an HO policy to provide coverage for a mobile home. In modern practice, mobile or manufactured homes are typically insured using separate policies (such as MH forms or HO-7). State exams may still test the older “Mobile Home endorsement” concept.

Water craft

This endorsement provides liability protection for certain types of watercraft. It extends liability for larger watercraft arising out of the ownership, maintenance, or use of the watercraft described in the endorsement.

Personal injury

When added, this endorsement amends Section II of the policy to include liability for personal injury caused by the insured.

Personal injury is different from bodily injury. It can include libel, slander, invasion of privacy, defamation, wrongful eviction or entry, and similar offenses.

This endorsement will not cover personal injury arising from:

• Contracts
• Violation of law
• Business activities

Personal property replacement cost

This endorsement changes how losses to personal property are settled. Instead of paying on an actual cash value basis, the policy reimburses covered personal property losses on a replacement cost basis.

Scheduled personal property

This endorsement allows an insured to individually list (schedule) items that have a higher value than what the basic policy covers. Items commonly covered under this endorsement include:

• Jewelry
• Furs and fur-trimmed garments
• Cameras
• Guns and equipment
• Musical instruments
• Silverware
• Golf equipment
• Fine arts
• Stamps and coin collections

This coverage is typically written on an open-perils basis and may have no deductible.

Unit owners coverage

This endorsement can be used to amend Coverage A of an HO-6 policy to provide coverage for risks of direct loss. It makes the perils insured under Coverage A of an HO-6 identical to those insured by the HO-3, helping cover additional alterations and improvements made to a condominium unit.

It effectively makes HO-6 Coverage A “open perils” like an HO-3.

Water back-up and sump over-flow

This type of loss is generally excluded under a homeowners policy. For an additional premium, it may be covered. Typical limits vary ($5,000-$50,000) depending on the carrier.

Lesson summary

Homeowners insurance policies can be enhanced with various endorsements, offering additional coverage for specific needs:

• Inflation Guard: Automatically increases dwelling coverage to keep up with replacement value changes over time.

• Business Pursuits: Extends liability coverage for business activities conducted within the insured’s home.

• Permitted Incidental Occupancies: Allows liability protection for business activities that are incidental to home occupancy.

• Home Day Care: Provides liability protection for operating a home daycare business with specific exclusions.

• Mobile Homes: Provides mobile home coverage when endorsed for exam purposes; in practice, mobile homes are usually insured under separate MH or HO-7 forms.

• Water Craft: Provides liability protection for certain types of watercraft owned, maintained, or in use by the insured.

• Personal Injury: Includes liability for personal injury such as libel, slander, and more, excluding specific instances.

• Personal Property Replacement Cost: Reimburses loss of personal property on a replacement cost basis instead of actual cash value.

• Scheduled Personal Property: Allows listing high-value items not covered by the basic policy individually.

• Unit Owners Coverage: Modifies HO6 policy to provide coverage for direct loss risks, aligning it with HO3 policy.

• Water Back-up and Sump Overflow: Covers losses typically excluded from a homeowner policy for an additional premium.

Chapter vocabulary

Definitions

Personal Injury Liability

Liability coverage for non-bodily injury offenses, including libel, slander, defamation, false arrest, false imprisonment, wrongful eviction, wrongful entry, invasion of privacy, and malicious prosecution.

Scheduled Personal Property

This endorsement allows an insured to individually list pieces of property that possess a higher value than is covered by the basic policy.

Watercraft Endorsement

This coverage may be attached to a homeowners contract by endorsement to provide for outboard motors over 25 horsepower, inboard motors, and sailboats over 26 feet in length.