What is an "endorsement" in an insurance policy?

An endorsement in an insurance policy refers to a written amendment or addition that modifies the terms of an existing policy. This can include changes to coverage limits, the addition of new coverage types, or exclusions that alter the conditions under which a policy operates. Essentially, endorsements serve to customize the insurance coverage to better fit the insured's needs without having to create an entirely new policy. This flexibility is important as it allows both insurers and policyholders to update and modify agreements in response to changing circumstances or requirements.

In contrast, the other options describe different aspects of insurance not related to endorsements. A financial penalty for late premium payments is a consequence of non-payment, while the initial application for coverage refers to the submission made to obtain insurance. A notice of cancellation signifies that the insurer is terminating coverage, which is distinctly different from making amendments to the terms of a policy.