Property and Casualty Insurance Practice Exam

What type of perils may require additional coverage through an endorsement?

1. Common household risks

2. Normal wear and tear

3. Extra Hazardous Perils

4. Insured's controllable losses

The correct answer is: Extra Hazardous Perils

The type of perils that may require additional coverage through an endorsement are extra hazardous perils. In the context of property and casualty insurance, standard policies typically cover a defined set of perils, often referred to as "named perils." However, some situations involve risks that surpass the usual coverage, necessitating additional endorsement or riders to adequately protect the insured from potential losses. Extra hazardous perils are those events or risks that are considered more significant or unusual than typical household risks. For example, specific types of natural disasters, acts of terrorism, or certain environmental conditions might fall into this category, and may not be included in standard coverage. As a result, policyholders often need to add these endorsements to ensure that they have comprehensive coverage for these unique risks. In contrast, common household risks are generally covered under standard policies, and normal wear and tear is usually excluded from coverage. Insured's controllable losses relate more to the policyholder's behavior or actions, which can also fall outside the typical coverage parameters. Hence, seeking additional coverage is especially crucial for addressing the increased risks associated with extra hazardous perils.