An insurance rider, also known as an endorsement, adds or modifies an insurance company's original coverage details. You can add riders to many policy types, including business insurance and life insurance.
If you're a business owner who wants to modify and customize your insurance to mitigate risk and loss exposure, you may want to consider business insurance riders. Here's everything you need to know.
What is an insurance rider?
Most insurance policies come with standard coverage detailed in the insurance contract, but there may be times you'll want to add or change coverage. This is done with an insurance rider. You'll usually pay extra to add a rider when you need to fill a gap in the standalone policy and customize your business insurance.
You can find riders on all sorts of business policies, including general liability insurance, commercial property insurance, and commercial auto insurance. How the rider affects the policy's coverage depends on what's missing in the stand-alone policy and what the rider says it will cover.
Why are the benefits of riders?
The best liability insurance providers spend a lot of time, money and thought developing a business customer's basic insurance contract. The primary contract consists of standard coverage and is generally static, meaning the insurance carrier isn't going to go line by line to modify or change an insurance policy contract to suit any individual customer.
This is where riders come in. Riders allow customers to make changes to provide more comprehensive coverage. The insurance company can standardize the rider's language as well.
When a business owner obtains a rider for a current insurance policy, they don't have to go out and investigate new policies and carriers. In some cases, the exact type of business insurance coverage they want isn't available on the market, and the only way to get the coverage they need is through a rider.
By modifying a policy rather than buying another policy, business owners ultimately save money on business insurance.
For what types of business insurance can you add a rider?
You can add riders to various insurance and business insurance policies. Business owners likely already need to purchase general liability, commercial property, commercial auto insurance, workers' compensation insurance or business interruption insurance.
The carrier will standardize each of these policies as the monoline policy. Then, business owners can make modifications to better protect themselves from losses by adding a rider.
Note that some riders actually eliminate the need for another policy, such as inland marine riders for commercial auto insurance. If you buy the rider, one policy might cover two needs and save you money.
How to modify your business insurance with riders
Since any insurance contract can be modified with riders, there are many options to consider. It's important to talk to your insurance carrier about what riders are available for policies you're purchasing. Not every carrier offers the same selection of riders, which may lead you to choose another insurance company.
These are some examples of business insurance riders:
- Commercial property rider: This is a type of inland marine coverage that protects business property that isn't stored at a fixed location.
- Claims filing extension: This rider is for claims-made professional liability policies. It allows the policyholder additional time to file an insurance claim.
- Specific property coverage: This rider extends commercial property insurance coverage to include things like underground pipes, drains or fencing that may otherwise be excluded.
- Workers' compensation extension: This rider extends workers' compensation benefits to casual employees you're not mandated to cover.
- Contingent business interruption: This rider kicks in when a primary supplier, partner or customer shuts down, preventing your standard business operations from moving forward.
- Communicable disease rider: This rider covers losses that occur due to infectious diseases. This would have covered business shutdowns due to the COVID-19 pandemic.
Buying an insurance rider
Buying the rider is as simple as letting your insurance carrier know you want to add specific coverage. Riders usually cost pennies on the dollar compared to a whole new policy, making them an affordable and efficient way to add coverage.
However, when choosing business insurance, many business owners don't know about riders and don't think to ask about additional coverage, assuming the policy they're purchasing covers everything they'll need. This isn't the case. Be sure to ask your carrier about its options to see if any riders fit your needs.
Depending on your business activities, some riders make more sense than others. For example, a contractor constantly moving tools from job site to job site must have coverage for commercial property not at a fixed location. They must be covered wherever their work takes them and while they're commuting. A commercial property rider will cover these situations.
Similarly, a business that relies heavily on a specific supplier for necessary production materials would be shut down if there were a supply chain problem. This is where contingent business interruption riders come into play.
Often, a specific rider will make sense for you and your business, while others won't seem as important. Business owners should talk to their insurance agent about their company's specific needs and ask if certain riders would better protect their interests.
Making a claim on a rider
One of the great things about a rider is there is no added work if you file a claim. As long as you pay your premium, the claims process is seamless and includes losses related to the rider.
To make a claim, you'll gather all the loss details and call the insurance carrier. The carrier will confirm your coverage, including the rider. Once the carrier confirms the rider, it will open the claim with your loss details. A claims adjuster, who determines the loss's value, will process the claim, and the business owner will receive payment.
Insurance rider FAQs
Here are some common questions about insurance riders.
What other insurance types have riders?
Riders are not just for business insurance. There are standard riders found in homeowners, personal auto and life insurance. For example, a common homeowners insurance rider is coverage for sewer and drain backups. A typical personal auto insurance rider is accidental death coverage. Life insurance has many riders, including a waiver that pays your premium if you become disabled.
What do insurance riders typically cost?
Riders aren't free in most cases, though there are instances where an insurance carrier will add a rider for free to expand coverage or even meet state minimum insurance requirements. The cost of a rider varies widely, but it's often just a few extra dollars per month. Carriers offer riders for less than monoline policies because there is less underwriting involved.
What is the difference between an insurance rider, endorsement and floater?
A rider and an endorsement are the same: They both add coverage to a policy for specific need categories. A floater is similar in that it's added to a policy to increase coverage. The key difference is that a floater adds coverage for specific items. Floaters are most commonly found with homeowners insurance policies and often add coverage for items such as jewelry or fine art.
Are business insurance riders worth it?
Without a rider, a business owner may miss out on much-needed coverage. There is no worse feeling than having a claim you think is covered by insurance that actually isn't. Riders are worth their cost because they address specific use cases to limit your financial responsibility in common claims.