Extended Coverage

Examples

Golf Course Adjacent Home: A homeowner who lives next to a golf course may discover that their standard homeowners’ insurance policy does not cover damage caused by errant golf balls. An extended coverage policy can be obtained to cover such specific damages.
Flood Damage: Standard homeowners’ insurance typically does not cover flood damage. Homeowners can purchase extended coverage to protect against this risk.
Earthquake Protection: In areas prone to earthquakes, standard insurance policies might exclude coverage for earthquake damage. Special earthquake insurance can be added as extended coverage.
Personal Property Theft: While basic policies may cover theft from within the home, extended coverage may include protection for personal property stolen from elsewhere, such as a car.
Mold Remediation: Standard policies might limit coverage for mold damage, but extended coverage can offer more comprehensive protection against costly remediation.

Frequently Asked Questions

Q1: What is normally excluded from standard homeowners’ insurance policies?

A: Standard policies often exclude incidents like floods, earthquakes, mold damage, and certain types of theft or vandalism. Extended coverage can be acquired to protect against these risks.

Q2: Is extended coverage expensive?

A: The cost of extended coverage varies based on factors like the type of risk, location, and the value of the property. Typically, the added expense is justified by the specific risks it mitigates.

Q3: How do I know if I need extended coverage?

A: Assess your property’s unique risks, review your existing insurance policy for exclusions, and consult with an insurance agent to determine if extended coverage is necessary.

Q4: Can extended coverage be added to any type of insurance policy?

A: Yes, extended coverage can be added to a variety of insurance policies including homeowners, renters, auto, and commercial property insurance, depending on the specific needs.

Q5: Does extended coverage include liability protection?

A: Extended coverage typically focuses on property damage and not liability. However, some specific policies may include limited liability protection extensions.

Exclusion: Specific conditions or circumstances for which the policy does not provide coverage.
Endorsement: An amendment or addition to an existing insurance policy which changes the terms or scope of the original policy.
Peril: The cause of a loss, like fire, theft, or flood, which may or may not be covered by insurance.
Liability Insurance: Coverage that protects against claims alleging that a property owner’s negligence or inappropriate action resulted in bodily injury or property damage to another party.
Deductible: The amount of money that the insured must pay out-of-pocket before the insurance company pays a claim.

Online Resources

References

“Homeowners Insurance 101: A Guide to the Must-Have Coverages”. Investopedia. Retrieved from Investopedia Guide
United States Department of Homeland Security. “National Flood Insurance Program”. Retrieved from FEMA
“Extended Coverage: What Property Owners Need to Know”. Insurance Information Institute. Retrieved from III

Suggested Books for Further Studies

“Insurance for Dummies” by Jack Hungelmann
“Property and Casualty Insurance Concepts Simplified” by Christopher J. Boggs
“Homeowner’s Insurance Basics: Everything You Need to Know” by Cynthia Kersey
“Personal Insurance: The Foundation of Asset Protection” by Debbie M. Cook
“Understanding Property Insurance and Compensation Plans” by William G. Werfelman

Real Estate Basics: Extended Coverage Fundamentals Quiz

### What does extended coverage typically do? - [ ] Exclude additional risks - [ ] Lower the premium of your policy - [x] Include protection for incidents otherwise excluded - [ ] Eliminate the need for a deductible > **Explanation:** Extended coverage policies include protection for specific incidents that are normally excluded from standard insurance policies, offering additional peace of mind. ### Which is a common reason to purchase extended coverage? - [ ] To bundle multiple properties under one policy - [x] To cover damage from risks like floods or earthquakes - [ ] To receive lower interest rates on mortgages - [ ] To improve the home's resale value > **Explanation:** Homeowners often purchase extended coverage to protect against specific risks such as floods, earthquakes, or mold damage, which are not typically covered by standard insurance policies. ### Extended coverage can be added to: - [ ] Only homeowners' insurance - [ ] Only commercial property insurance - [x] Various types of insurance policies - [ ] Only auto insurance > **Explanation:** Extended coverage can be added to various types of insurance policies, including homeowners, renters, auto, and commercial property insurance, depending on need. ### What is an example of a peril that might necessitate extended coverage? - [ ] Maintenance issues - [x] Earthquake damage - [ ] Normal wear and tear - [ ] Routine landscaping > **Explanation:** Earthquake damage is an example of a peril that may not be covered by standard policies, necessitating an additional extended coverage policy specifically for earthquakes. ### Is extended coverage primarily focused on liability or property damage? - [ ] Liability - [x] Property damage - [ ] Both equally - [ ] Neither > **Explanation:** Extended coverage is primarily focused on addressing specific property damage risks that are typically excluded from standard insurance policies. ### Does extended coverage eliminate the deductible on your policy? - [x] No, deductibles still apply - [ ] Yes, it eliminates deductibles - [ ] Only for water damage - [ ] Only for theft > **Explanation:** Extended coverage does not eliminate the deductible on your policy. The deductible will still apply before the insurance company pays out for any covered loss. ### If a home is adjacent to a golf course, why might extended coverage be necessary? - [ ] To lower property taxes - [x] To cover damages from errant golf balls - [ ] To ensure comprehensive watering of the lawn - [ ] To attract potential renters > **Explanation:** Living adjacent to a golf course presents a unique risk, such as damage from errant golf balls, which is an incidence that standard homeowners' insurance policies usually do not cover, necessitating extended coverage. ### Who should you consult to determine your need for extended coverage? - [ ] Bank manager - [x] Insurance agent - [ ] Real estate agent - [ ] Landscape designer > **Explanation:** Consulting with an insurance agent is crucial for identifying specific risks that might necessitate extended coverage and ensuring you have adequate protection. ### Which typically does NOT require extended coverage? - [ ] Floods - [ ] Earthquakes - [ ] Mold remediation - [x] Fire damage > **Explanation:** Fire damage is typically covered under standard homeowners’ insurance policies and does not usually require extended coverage. ### The primary purpose of extended coverage is to: - [ ] Increase the valuation of your property - [ ] Simplify the claims process - [ ] Remove all coverage exclusions - [x] Provide protection for specific excluded perils > **Explanation:** The primary purpose of extended coverage is to provide protection for specific excluded perils that are not covered under standard insurance policies.