Information on Extended Coverage Under Homeowners' Insurance
Extended insurance coverage sounds like something you have to pay extra for. Instead, it's part of most standard homeowners policies, extending the sources of damage they cover beyond just fire insurance. Not all policies extend to cover the same number of perils but unless you chose to buy a policy solely covering fire, you already have extended coverage.
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Perils
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Extended coverage refers to a list of several "perils" homeowners insurance protects against, the International Risk Management Institute states. Those include windstorms, hail, explosions, riots, civil commotion, aircraft and vehicle damage to your property. Even the "bare bones" policy, HO-1, covers all of these; other polices cover up to 16 perils, including theft, volcanic eruption, falling objects, damage from the weight of snow, and damage caused by your plumbing breaking, freezing, overheating or overflowing.
Policies
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HO-1 policies have been discontinued in most areas because they offer such limited coverage compared to other forms. You're protected against only 10 of the 16 listed perils with an HO-1. An HO-2 policy offers protection against all 16 perils. HO-3 protects your home from any perils not specifically exempted, the Insurance Information Institute states. Exemptions include damage from flooding and earthquakes. If you live close to a coast in a hurricane-vulnerable area, your insurer may also exempt wind damage.
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Replacement Value
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Regardless of which peril hits your house, your claim may be limited by the type of coverage you took out. Cash value policies will pay the original purchase price of your possessions, less wear and tear for the years you've owned them. Replacement value, on the other hand, will pay the cost of actually buying a replacement, which is probably considerably more. The more expensive guaranteed replacement-cost policy covers the replacement value even if it's more than the dollar value of the policy.
Considerations
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A standard HO-3 policy sets limits on how much it will pay for damage or loss of certain kinds of property, the Nolo legal website states. Business equipment in your home office may not be covered, for instance, and there are limits to how much the policy will pay on particular possessions such as collectibles, furs, antiques or art. If you want to have those thoroughly insured, you'll need to take out extra coverage.
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References
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