What Is an Endorsement?

Endorsement is a term that has various definitions depending on the context of its use. For example, a signature authorizing the legal transfer of a negotiable instrument between parties is an endorsement. Endorsements can be amendments to contracts or documents such as life insurance policies or driver's licenses. A public declaration of support for a person, product, or service is also an endorsement.


Understanding Endorsements

Types of Endorsements

An endorsement can mean different things depending on the context. Below is a summary of some of the main types of endorsements.

Signature Endorsements

A signature is an endorsement. For example, when an employer signs a payroll check, it authorizes or endorses the transfer of money from the business account to the employee. The act of signing the check is considered an endorsement, which serves as proof of the payer's intent to transfer funds to the payee.

In a financial transaction where one party gives a check to another, the payee named on the check must endorse the check before it is cashed. The payee endorses the check by signing it on the back. A signature on the back of the check marks the transaction completion and allows the transfer of money ordered by the check.

If more than one person is listed as a payee on the check, then the endorsement requirements differ depending on how the names are written. (For example, if the check is written out to John Doe AND Jane Doe, both people must sign the check.) If the check is written out to John Doe OR Jane Doe, only one signature is required.

Signing the back of a check to be cashed is called a blank endorsement. Anyone can cash or deposit a check with a blank endorsement, even if the check is not written to that individual.

Insurance Endorsements

Insurance endorsements are amendments in the form of modifications of or additions to the original policy. For example, a policy provision continuing monthly income to a beneficiary after the death of the insured is an example of an endorsement and is also known as a rider. Typically, this type of endorsement increases the policy premium due to the added benefits to the policyholder(s) and beneficiary(ies) and the increased risk to the insurer.

License Endorsements

License endorsements give additional rights or privileges to a licensee. For example, a driver who obtains a motorcycle endorsement on a driver’s license is permitted to operate a motorcycle on public roads. License endorsements also refer to the types of authorized vehicles or to the type of cargo a vehicle may carry.

The opposite of a license endorsement is a restriction. A restriction places a caution on the person’s right to operate a vehicle. For example, corrective eyewear restrictions. Eyewear restrictions apply to people whose natural vision does not meet the minimum requirements for vehicle operation without the use of corrective lenses.

Special Considerations: Endorsements as Support

Endorsements are also forms of approval. A person or entity may make a public declaration of support for a person, product, or service. Most commonly, this is in the form of a government official or influential person supporting a political candidate or an industry expert supporting a new product, service, or concept. In the marketing realm, supporters of products are called "influencers," and they leverage social media to market the objects of their support.

Key Takeaways

  • Endorsement applies in many contexts, and it has different meanings depending on the context.
  • Endorsements are forms of approval. For example, by signing the back of a check, the payee is approving the cashing of that check.
  • Individuals act as endorsers and often influence the success of products and services by voicing their support through social media.

[Fast Fact: According to a survey conducted by Collective Bias, 70% of millennial consumers are influenced by the recommendations of their peers in buying decisions.]