What is hazard insurance?


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UPDATED: 2019-05-22T16:05:59.381Z
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Fire in home covered by hazard insurance

If you’re a first-time home buyer, you’ve likely already encountered a dizzying array of complex terms that are challenging to grasp quickly. One of the most confusing elements of the home buying process is the insurance that will cover your new home. You certainly can’t do without homeowners insurance; after all, you have to safeguard your home against risks, don’t you?

But before you sign the dotted lines and buy homeowners insurance, you should understand what you’re getting out of it and why you need it. One often misunderstood element of your homeowners insurance is hazard insurance.

What is hazard insurance and what does it cover?

When you hear the term hazard insurance, it generally refers to the portion of your homeowners insurance policy that covers your home from risks that arise from natural causes (although non-natural causes may also be included). Hazard insurance covers things like fire, lightning, windstorms, hail, volcanoes and some other events that can damage your home quite substantially. If your new property sustains any kind of damage structurally from a peril covered by your hazard insurance policy, you can claim damages and recoup the financial loss the damage caused.

One thing to note is that you can have all the structures on your property covered by hazard insurance. For example, your garage or a shed that’s not attached to your home may also be covered by the policy.

There are two kinds of hazard insurance policies you may come across. One is the kind where you have a list of the exact hazards that you wish to have your home safeguarded against. This list will typically include risks like fire/smoke, hail, lightning and ice/snow/sleet. The other kind of hazard insurance is one that has a list of hazards that are not covered, and in the event your home is damaged by a hazard that is not listed, you can file a claim. The first kind is called a named peril policy and the second kind is known as an open peril policy.

Is hazard insurance the same as homeowners insurance?

Hazard insurance is commonly misunderstood because it’s not actually it’s own insurance coverage. Hazard insurance is actually part of your homeowners insurance policy.

Hazard insurance is a part of homeowners insurance that specifically protects you against these risks. You don’t need a separate hazard insurance policy, but you may need to specify that you need this added to your home insurance policy.

The term hazard insurance is actually commonly used because of home lenders. The mortgage loan on your home may specify that you need at least hazard insurance before it will issue you a loan.

Because the lender has a financial stake in your home, the lender wants to ensure the structure of your home is properly covered. Hazard insurance typically provides the necessary coverage of a homeowners insurance policy to satisfy a mortgage lender.

But keep in mind, hazard insurance alone doesn’t provide your belongings with coverage or protect you from liability issues if a guest was to get injured on your property.

Why do you need hazard insurance?

The structure of your home can be worth hundreds of thousands of dollars, and a fire or tornado could result in a complete loss of your home. And many other hazards could also cause detrimental damage to your home.

To ensure you’re properly protected, and to ensure you satisfy your home loan agreement, hazard insurance is necessary. Keep in mind, though, that floods and earthquakes aren’t covered by standard homeowners insurance policies. If you’re interested in protecting your homes from these perils, you’ll need to look into a separate flood insurance or earthquake insurance policy.

If you’re shopping for a homeowners insurance company to protect your home, check out which insurers others like you have rated as the best homeowners insurance companies in your area.


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