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). The endorsements below are commonly tested on state licensing exams.

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 help coverage keep pace with increases in replacement cost.

Business pursuits

Some insureds run a business from their home. This endorsement extends liability coverage to include liability arising out of those business activities.

Without this endorsement, the homeowners policy generally provides no liability coverage for bodily injury to others arising out of business activities conducted by the insured.

Permitted incidental occupancies

This endorsement removes the homeowners policy exclusion that applies to liability coverage for business activities on the premises. It provides 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 typically calculated by head (the 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

Mobile homes

An endorsement can be added to a homeowners policy to provide homeowners-like protection for a mobile home. This coverage can also be purchased as a separate policy.

Water craft

This endorsement provides liability protection for certain types of watercraft. It extends liability coverage 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 does 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 lets the insured list (schedule) individual items that have a higher value than the basic policy limits allow. 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

Unit owners coverage

This endorsement can be used to amend Coverage A of an HO6 policy to provide coverage for risks of direct loss. It makes the perils insured under Coverage A of an HO6 identical to those insured by the HO3, helping cover additional alterations and improvements made to a condominium unit.

Water back-up and sump over-flow

Losses from water back-up and sump over-flow are generally excluded under a homeowners policy. For an additional premium, this endorsement may be added to provide coverage.

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: Offers homeowner-like protection for mobile homes.

• 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 those who have been discriminated against, falsely arrested, illegally detained, libeled, maliciously prosecuted, slandered, suffered from identity theft, mental anguish, or alienation of affections, or have had their right to privacy violated.

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.