What Is an Insurance Rider in Business?

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: 

• General liability insurance
• Commercial property insurance
• Commercial auto insurance
• Workers’ compensation insurance
• Business interruption 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. 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. 

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.

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.

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. 

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.

Sean Peek contributed to this article.