What is the purpose of endorsements in an insurance contract?

The purpose of endorsements in an insurance contract is primarily to add or reduce coverage or change premium prices. Endorsements serve as modifications to the original insurance policy, allowing for customized coverage that meets the specific needs of the policyholder. For instance, an endorsement might broaden coverage to include additional risks or reduce coverage for certain circumstances, affecting the overall premium costs associated with the policy.

The use of endorsements is essential in the insurance industry because it provides flexibility and ensures that policyholders can adequately tailor their insurance to fit their unique requirements and circumstances, thus enhancing their protection. This mechanism allows insurers to adjust and update the terms of coverage without having to issue an entirely new policy, making it a practical tool for both insurers and insureds in managing risk.