Define endorsement in an auto insurance policy.

In the context of an auto insurance policy, an endorsement refers to a change or addition that modifies the coverage or terms of the policy. This means that when an endorsement is added, it can expand, restrict, or alter the conditions under which the insurance coverage applies. For example, you might add an endorsement to include coverage for a newly acquired vehicle, adjust the limits of liability, or add bereavement coverage following an accident.

Endorsements are essential for tailoring insurance policies to meet the specific needs of policyholders, ensuring that they receive the appropriate coverage as their circumstances change. This flexibility is a significant benefit of insurance policies, allowing for updates as new risks or requirements arise.

Understanding endorsements is critical for insurance professionals, as they can impact both the premium cost and coverage limits, thus affecting the overall financial protection offered through the policy.