Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

What is an endorsement in the context of an insurance policy?

1. Change to the terms of the policy

2. Adds coverage to the existing policy

3. Insures specialty items

4. Provides temporary insurance during repairs

The correct answer is: Change to the terms of the policy

An endorsement in the context of an insurance policy functions as a formal change to the terms of the policy itself. It is a written amendment that alters the coverage, exclusions, or limits originally outlined in the insurance policy. Endorsements can serve a variety of purposes, such as changing deductibles, adding or removing coverage, or amending the details of what is insured. While endorsements can indeed add coverage to an existing policy, that aspect is just one of the possible functions an endorsement can fulfill. The term "endorsement" itself encompasses a broader range of adjustments to the policy terms, which is why the definition that characterizes them as changes to the terms is accurate and captures the essential nature of what an endorsement represents in the insurance field. Other options, like insuring specialty items or providing temporary insurance, reflect specific scenarios or needs that might be addressed through endorsements but do not encapsulate the full range of their functionality.