What is Extended Coverage?

Malcolm Tatum

"Extended coverage" is a term that is often used with insurance plans, and refers to coverage that is above and beyond the benefits provided by a standard insurance contract. Plans offering extended coverage on various types of property are fairly common around the world, and provide additional protection in specific situations. The cost for extended coverage is typically higher than with standard plans, although the additional benefits can often pay for themselves if even a single incident occurs that is covered within the terms of that extra coverage.

If you live in a high-risk area, you should also be sure your home protection insurance policy will cover flood damage.
If you live in a high-risk area, you should also be sure your home protection insurance policy will cover flood damage.

With most property insurance policies, insured parties are covered for a range of events that the provider considers to be possible but somewhat unlikely to occur with any degree of frequency. For example, a standard insurance plan may include coverage against fires or damage sustained from lighting strikes during a rainstorm. Events that have a higher degree of probability within a given geographical area would not be covered under the terms of the standard policy, since they would represent a higher level of risk to the insurance provider. When this is the case, coverage of those more likely events would only be found in an extended coverage insurance plan.

Since extended coverage provides protection that is above and beyond that offered in standard insurance policies, there is an additional cost. The amount of that cost is directly related to the degree of risk that the insurance company is taking on by providing the coverage. For example, wind and flood insurance benefits would be costlier in areas that are subject to flooding from local rivers and lakes, as well as areas that are more likely to experience tornadoes or hurricanes. In some cases, insurance companies may determine that the degree of risk is so great that offering extended coverage within a given geographical location is not feasible.

Extended coverage may also have some limitations in terms of the number of claims the policyholder can file within a given calendar year. This means that if someone living in an area that is prone to hurricane activity should experience property damage related to several different hurricanes during the season, the provider may only approve claims filed after the first couple of incidents. For this reason, it is important for property owners to read and understand the terms of the extended coverage before actually purchasing it, making sure that he or she is satisfied with the scope of coverage provided under the provisions of the plan.

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