State Farm Insurance License Practice Exam

Which term refers to the additional coverage for losses not initially anticipated in a standard policy?

1. Exclusionary clause

2. Endorsement

3. Condition precedent

4. Co-insurance

The correct answer is: Endorsement

The term that refers to the additional coverage for losses not initially anticipated in a standard policy is an endorsement. An endorsement is essentially an amendment or addition to a standard insurance policy that expands or alters the coverage provided. It allows policyholders to tailor their insurance to better fit their specific needs by covering risks that were not included in the original policy. For instance, if a homeowner's policy does not cover certain natural disasters, an endorsement can be added to provide that specific coverage. This flexibility is crucial for adapting policies to various situations, ensuring that policyholders have adequate protection against unforeseen risks. Other terms listed, such as an exclusionary clause, are related but serve a different purpose; they typically outline what is not covered under the policy. Conditions precedent refer to specific conditions that must be met before coverage becomes effective. Co-insurance generally refers to a shared payment agreement between the insurer and the insured regarding certain types of coverage, which also does not pertain directly to providing additional coverage.