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“Oh no, am I covered for that?” is definitely not a question you want to be asking yourself after disaster strikes your business. When purchasing commercial property insurance, it’s important to understand the contract language so that you know the limits of your coverage, and insurance extensions are a key part of your policy. In order to understand how far your coverage extends, you need to understand what insurance extensions are.
For example, many commercial property insurance policies cover the buildings and other commercial property your business owns and what you list on your policy upon purchase. However, if your operation expands and you need to rent, purchase or build additional property, you’ll want to make sure the new location is covered, even though it did not exist at the time you purchased your policy. Whether you are in the construction business or a jewelry maker who owns your building, you’ll want to know when insurance extensions come into play.
In this post, you’ll find what you need to know about insurance extensions, so you have a better understanding of the scope of your policy.
What is an extension in insurance?
Insurance extensions, or coverage extensions, include coverage that is already part of your policy but extended in some way.1 In many cases, the extended coverage is small and provided at no additional cost.
An example of an extension on general liability insurance is called Customer Property Protection. This covers the property of others that is in your care, custody, or control up to a specific limit that will be detailed in your policy.
Another example of an insurance extension involves extending standard coverages to include newly acquired property. This insurance extension covers new construction projects on your existing site and any new buildings in a different location for a specified period of time to give you a chance to update your policy.
What is the difference between “coverage extension” and “additional coverage”?
Coverage extensions are already provided by an insurance policy but are simply extended in some way to accommodate your needs. By comparison, additional coverage offers you limited protection against specific types of losses or for costs related to covered losses that would otherwise not be covered under the policy.
For example, a standard policy may cover costs associated with debris removal if a storm damaged your property. Additional coverage could include an added expense, such as a service charge from the local fire department. A sub-limit usually applies to additional coverage, and it is typically a lower limit than the policy limit.2
What are common extensions in business insurance?
Your commercial property insurance policy can cover your commercial property, your business equipment, and the cost of business interruption due to a direct physical loss. As we’ve already mentioned, insurance extensions extend your coverage in some way. Here’s a look at six common types of insurance extensions.
1. Newly Acquired Or Constructed Property
This insurance extension includes buildings or business personal property. Suppose your business is conducting new construction on the same premises or acquires buildings at a new location. In this instance, an insurance extension might cover a specified dollar amount for buildings up to a specified maximum amount per building.
Also, the extension for business personal property at newly acquired locations would cover a portion of the existing coverage amount for personal property, up to a specified maximum at each new building.
Take note that this extension typically applies for a maximum number of days and will not extend beyond the policy’s expiration date or the date you notify the carrier of the new locations.
2. Personal Effects and Property of Others
You may get an insurance extension on your commercial property policy to cover personal effects that are owned by you, your employees, your officers, or your partners.
For example, if you own a jewelry repair business and you have a fire in your workshop that destroys, among other things, an employee’s personal possessions, this extension is a good one to have in your policy because it will help to cover your employee’s personal property. One caveat is that this extension usually does not cover loss or damage by theft.
Also, this extension will help to cover the personal property of others in your care, custody, or control, such as the belongings of friends or family you may have on your commercial property.
3. Valuable Papers and Records
In the data-driven age, the most valuable items in a workplace are often its papers and digital records. If records are damaged or destroyed, restoring or reproducing them can be a costly, time-consuming process.
In the event of a loss, you may get an insurance extension to cover the costs of researching, restoring, and replacing the lost information on valuable papers and records.
4. Outdoor Property
You can also extend your coverage to apply to your outdoor property. This property may include fences, shrubs, and signage. This extension may also cover the costs of debris removal, providing the cause of loss is a covered peril, such as fire, lightning, explosion, aircraft, riot, or civil commotion.
5. Property Off-premises
This extension covers commercial property and equipment while temporarily off-premises at another location. However, this cover will likely not apply to the following circumstances:
- The property is in or on a motor vehicle
- The property is in the control, care, or custody of your salespeople
- The property is at a fair or exhibition
6. Non-owned Detached Trailers
This extension covers property that is temporarily held in a portable storage facility or detached trailer. A common example is when truck drivers leave trailers at their destination for the recipient to unload. Later, the driver will return to retrieve the empty trailer. This extension will provide some protection for the property until the driver returns.
How can you get an extension on your insurance policy?
Despite its vital importance in our lives, insurance remains a mystery for many people. Sitting down to read an insurance policy from cover to cover doesn’t have the same allure as a Harry Potter novel. Let’s be honest — even if you take the time to study your policy word for word, the jargon can often leave you feeling more confused than before you started reading.
But you can’t sweep this under the rug — your business needs a reliable insurance policy. If Murphy’s law strikes, you want to be sure you have the cover you need.
One useful way to confirm that your policy covers you for all your needs is to talk to a knowledgeable agent or broker, who can help you figure out what extensions you have, how they will apply, and whether you will need additional coverage.
Extending the invite to get the insurance you need
We know insurance can be a tricky topic, but you know how important it is to protect your business. When you buy commercial property insurance, you need to know the limits of your coverage.
Thimble makes insurance simple to help businesses succeed on their terms. Whether it’s hourly, daily, or monthly policies, we can provide you with protection against unexpected mishaps. With Thimble, you can get small business insurance in just 60 seconds.
- The Insurance Information Institute. Insuring Your Business: Small Business Owner’s Guide to Insurance.
- IRMI. Additions and Extensions of Property Coverage: Not an Alternative to Exposure Identification.
Written on August 24, 2021 | Modified on: August 27, 2021
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.