That WILL be covered. I had an extended warranty for five years when I had an E46 M3 and it was comprehensive. It DOES depend on which type you opted for, though, as there are drivetrain only warranties which likely would not cover this. Which did you get?
2010 E92 M3, DCT, w/Exhaust mod
2002 E36/7 Z3 2.2 Sport
2011 E82 120d Coupe