What does the endorsement in an insurance policy do?

The endorsement in an insurance policy serves an essential function by adding, modifying, or excluding coverage within the policy. This means that when an endorsement is applied, it specifically changes the terms of the original policy to better meet the insured's needs. For instance, it can expand coverage to include certain risks that were not previously included or can modify existing provisions to clarify the coverage provided. This flexibility allows policyholders to tailor their insurance policies according to their unique situations or changing requirements.

The other options do not accurately reflect the primary purpose of an endorsement. While modifying coverage might incidentally affect premium costs, that is not its defining purpose. Endorsements can indeed increase coverage limits, but they may also decrease coverage or specify exclusions depending on the needs of the insured. Lastly, an endorsement is not a renewal notice; renewal notices inform policyholders about the continuation of the policy, while endorsements are adjustments made to the policy terms themselves.