How do endorsements impact an insurance policy?

• A. They automatically cancel the policy
• B. They add or remove coverage options within the policy
• C. They adjust the policy premiums
• D. They increase the policy term

Answer: (B)

Endorsements are amendments or additions to an existing insurance policy that modify the coverage provided. They play a crucial role in tailoring an insurance policy to fit the specific needs of the policyholder. By adding or removing certain coverage options, endorsements allow insurance policies to be more flexible and offer protection for unique circumstances that may not be covered by standard terms.

For instance, a homeowner may wish to add an endorsement that covers specific valuable items like jewelry or artwork, which may not be adequately insured under the standard policy. Additionally, a business owner might add an endorsement to cover cyber liability as part of their general liability insurance.

In contrast, while endorsements can influence the premiums associated with the policy by adding or removing coverage, their primary function is to directly modify the policy's terms regarding what is protected. Thus, the answer emphasizes the critical role endorsements play in customizing insurance without implying that they cancel policies, adjust premiums as their main goal, or lengthen the coverage duration.