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Updated Feb 09, 2024

What Is an Insurance Rider in Business?

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Kimberlee Leonard, Senior Analyst & Expert on Business Operations

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An insurance rider, sometimes called an endorsement, adds or modifies an insurance company’s original coverage details. You can add riders to many policies, including business and life insurance. Doing so can tailor your insurance policy to your business’s precise needs and mitigate risk and loss exposure.

Here’s everything you need to know about business insurance riders, including key benefits, choosing the right option for your company and making a claim on your rider.

What is an insurance rider?

Most insurance policies come with standard coverage detailed in the contract, but there may be times when you want to add or change coverage. An insurance rider can accomplish this. You’ll usually pay extra to add a rider when you need to fill a gap in the stand-alone policy and customize your business insurance.

Riders can be added to many business insurance policies, including the following: 

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. The carrier will standardize each policy as the monoline policy. Then, business owners can add a rider to modify these policies and better protect themselves from losses. 

TipBottom line

If you have commercial auto insurance, consider getting gap insurance, an optional policy that pays the difference between the depreciated value of the car and what you owe.

What are the benefits of riders?

Insurance riders offer many benefits to businesses, including the following:

1. Insurance riders provide customized coverage.

A primary business insurance contract provides standard coverage and is generally static. The insurance carrier won’t go line by line to individualize the terms. However, your business may need more or different coverage than the standard provisions.

This is where riders come in. Riders let customers make changes to provide more comprehensive coverage – whether they need specific benefits not otherwise available or their needs have changed since their original contract was instated.

2. Insurance riders can save your business money. 

Though you must pay extra for each insurance rider, the additional cost is typically less expensive than buying a brand-new insurance policy. 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. 

Additionally, riders usually have lower deductibles than standard insurance policies. Thus, adding a rider could increase your overall insurance payout.

Getting riders can help business owners ultimately save money on business insurance while getting the coverage they need. 

3. Insurance riders bring peace of mind.

Running a business can be unpredictable, even in the best of times. Modifying your insurance coverage to mitigate risk and meet your business’s present (and future) needs can bring much-needed peace of mind.

Even if you don’t purchase an insurance rider now, knowing your options can empower you to plan ahead if you need additional coverage down the line.

Did You Know?Did you know

If you take out a business owner’s policy, your coverage will include general liability insurance and business property insurance for a lower premium than paying for both plans separately.

Types of business insurance riders

Since any insurance contract can be modified with riders, there are many options to consider. Ask your insurance carrier about the riders available for policies you’re purchasing. Not every carrier offers the same selection of riders, which may lead you to choose another insurance company. 

Some examples of typical business insurance riders include the following: 

  • Commercial property rider: A commercial property rider is a type of inland marine coverage that protects business property that isn’t stored at a fixed location.
  • Claims filing extension: A claims filing extension 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 proceeding.
  • Communicable disease rider: This rider covers losses that occur due to infectious diseases. For example, this rider would have covered business shutdowns due to the COVID-19 pandemic.
TipBottom line

Ask your business insurance broker about available riders to see if they provide coverage your stand-alone policy doesn’t include.

How to choose and buy an insurance rider

Buying an insurance rider is as straightforward 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, choosing a rider takes some consideration. When choosing business insurance, many business owners 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. Here are some examples:

  • Who needs commercial property riders? 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 commuting. A commercial property rider will cover these situations. 
  • Who needs contingent business interruption riders? 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 essential. Business owners should talk to their insurance agent about their company’s needs and ask if specific riders would better protect their interests. 

Did You Know?Did you know

Some business insurance costs are tax deductible. For example, you can write off auto insurance, general liability insurance, cyber insurance and health insurance.

How to make 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. 

Here’s how making a claim on a rider works: 

  1. Gather all the loss details and call the insurance carrier. 
  2. The carrier will confirm your coverage, including the rider. 
  3. Once the carrier confirms the rider, it will open the claim with your loss details. 
  4. A claims adjuster, who determines the loss’s value, will process the claim
  5. The business owner will receive payment.

Insurance rider FAQ

Riders are not just for business insurance. Standard riders are found in homeowners, personal auto, and life insurance. For example, a typical homeowners insurance rider covers sewer and drain backups. A typical personal auto insurance rider covers accidental death. Life insurance has many riders, including a waiver that pays your premium if you become disabled.

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 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 less underwriting is involved.

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 like jewelry or fine art.

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.

Just as insurance coverage varies from state to state, so do riders. The availability of specific riders and the circumstances under which they are implemented can differ depending on your geographic location, as well as the insurance carrier.

Some companies may add a life insurance policy for key personnel whose loss may disrupt business operations. Should that individual leave the company, the policy owner can conduct a transfer of insured rider, which swaps one insured individual for another. Consider your business’s individualized circumstances to determine whether a life insurance policy will benefit your business; you can also consult with your insurance provider or a financial professional for further insight.

Sean Peek contributed to this article.

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Kimberlee Leonard, Senior Analyst & Expert on Business Operations
Kimberlee Leonard is an insurance expert who guides business owners through the complicated world of business insurance. A former State Farm agency owner herself, Leonard started her decades-long career as a financial consultant advising on investment strategies before switching her focus to insurance and risk mitigation for businesses. Leonard has developed insurance primers on everything from small business insurance costs to specific policies, such as excess liability insurance. She has also reviewed business software tools, analyzed employee retirement plan providers and continues to share insights on financial topics as they relate to business. Leonard's work has been published in Forbes, U.S. News and World Report, Fortune, Newsweek and other respected outlets.
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