What Is Extended Coverage Insurance?

Water damage from floodwaters isn't covered under standard homeowners insurance.
i Michael Blann/Digital Vision/Getty Images

A basic homeowners insurance policy doesn't always give you enough coverage to pay for your losses. Although the extended coverage options your insurance company offers may vary depending on your state’s insurance regulations, there are usually different types of optional coverages you can add to your policy. It helps to read over your standard policy so that you’re clear about what it covers before laying out more money for added coverage.

Basic Coverage

A standard homeowners insurance policy includes coverage for your dwelling, the contents of your home, personal liability and medical expenses of someone who is hurt on your property. Your standard policy will also pay additional living expenses for you to live somewhere else while your home is being repaired after a loss. Your homeowners policy specifies the amounts the insurance company will pay out in each of these categories. If you need more protection, you must buy additional coverage.

Extra Options

Generally, standard policies don’t cover structures not connected to your main dwelling. If you want your detached garage or storage shed insured, you must pay extra. You can also buy additional coverage if you own valuable items like antiques, jewelry, high-end electronics, artwork and other collectibles not covered under your standard homeowners policy. If you live in an area where the sewer system is older, you might want to think about buying coverage for water damages caused by sewer backups. The coverage could save you big bucks, although you have to lay out more money for this or any other coverage options you add to your policy.

Peril Coverage

While most standard homeowners policies cover damages or losses from theft, fire, smoke, lightning, falling tree limbs and windstorms, they don’t cover all hazards. Depending on where you live, you may need to buy additional insurance to cover losses caused by floods, earthquakes, tornadoes or mudslides. In some coastal areas of the country, even hail and windstorm damage isn’t covered unless you pay extra for it. If your home is located in a flood plain, you may qualify to buy flood insurance through the National Flood Insurance Program. How much it will cost you depends on the amount of coverage you buy and your home’s flood risk.

Inflation Protection

To keep pace with the increasing rate of inflation, you can buy inflation protection coverage, but it will cost you extra. Without the optional coverage, you might not have enough money to repair or replace your home if you suffer a loss. Carrying the coverage helps protect you from being under-insured. By adding an inflation guard endorsement to your policy, each year the insurance company will automatically increase the coverage limits on your dwelling to keep up with inflation.

the nest