What is Hazard Insurance?

What is Hazard Insurance

If you’re a relatively new homeowner, you may have heard several terms that are new to you. Or, you might have come across terms that are often used interchangeably but serve different purposes. One topic that’s a bit confusing for some is hazard vs. homeowners insurance.

But is there a difference between hazard insurance and homeowners insurance? This article will explain and hopefully answer this question for you. 

What Is a Hazard Insurance Policy? 

Hazard insurance, which is sometimes referred to as building coverage, typically refers to your home’s structure, roof, walls, and floor coverage only. It protects you, the homeowner, against structural damage caused by natural disasters, such as wind, snow, fires, hail, lightning, rain, and other natural events, with the exception of flood and earthquake damage.

Is Hazard Insurance the Same as Homeowners Insurance?

Hazard insurance is typically a subsection of your homeowners policy that helps cover other structures, like your garage, sheds, and the main dwelling. You should make sure your insurance policy includes specific common hazards to be prepared for all contingencies.

If you take a mortgage out to purchase your home like many individuals, your mortgage lender will require that you have a specific amount of hazard insurance. This will secure the mortgage by using the insured value of the dwelling. Damage from a fire will decrease the value; therefore, lenders require obtaining insurance against hazards like these and others, so you have money to rebuild to restore the damaged structure.

Mortgage lenders frequently require you to pay your first year of premiums in advance at closing, and if they’re maintaining an escrow account for you, you might have to pay extra months’ premiums into this account.  Speak to your lender about this practice

Damage from perils to the structure on your premises are some of the most frequent and largest reported homeowners insurance claims.

How Does Hazard Insurance Relate to My Mortgage?

Your mortgage provider might require you to get hazard insurance before issuing you a loan. It’s the only part of your homeowners policy related directly to the structure of your home.

Thus, it might create a misconception you can purchase hazard coverage as a separate policy from your homeowners insurance, which isn’t correct. If your lender has told you that you need dwelling or hazard coverage, typically, buying a homeowners insurance policy will be all you need to do as it provides coverage for your personal property and your personal liability.

How Much Does Hazard Insurance Cost?

Hazard insurance is one of the most essential components of  homeowners policies. That’s because the majority of home insurance claims fall under the hazard coverage subsection of the policy. For this reason, your overall insurance premiums can be largely impacted by the amount of dwelling coverage your home needs to rebuild in the event of a catastrophe. 

Remember though, you don’t pay for hazard insurance as a separate cost. It’s built into your overall homeowners insurance policy’s costs.

The amount of hazard insurance you require depends on how much it would cost to replace your home if there’s a total loss. How much coverage you require might differ substantially from your property’s value in the present real estate market. Your overall costs can also be impacted by the deductibles and limits you choose, along with other coverage broadening endorsements.

What Does a Hazard Insurance Cover? 

Hazard insurance protects you against structural damage that natural disasters cause. Typically, hazard insurance covers your property’s structure if there should be a natural disaster, like a hurricane, a nor’easter, or a forest fire. Most hazard insurance policies will not cover earthquakes or a flood you would need separate coverage to protect against those types of natural disasters.

Hazard Insurance might cover losses from:

  • Lightening
  • Fire damage
  • Theft
  • Fallen trees
  • Hail
  • Damage
  • Explosions 
  • Vandalism
  • Vehicles that crash into your house

What Doesn’t Hazard Insurance Cover?

Flood and earthquake protection isn’t included as a hazard in your homeowners policy, as mentioned. Therefore, if there is a mild earthquake, and it causes a pipe to burst in your home that causes minor flooding, your hazard insurance policy won’t cover it. Depending on where you reside, your options will vary, but you could consider adding it to your current insurance or buy a separate policy.

Hazard insurance doesn’t typically refer to the type of coverage that offers you protection for injuries you or your guests incurred after an accident liability coverage might cover.

Keep in mind, all insurance policies aren’t the same, so you’ll want to check with your insurance agent or read your policy thoroughly to learn which risks might or might not be included. For instance, flood and earthquake damage is usually not covered through homeowners insurance.

You’ll want to do some shopping around. An independent insurance agent can conduct this hazard insurance comparison shopping for you. 

Let The Insurance Center of North Jersey Help You Obtain Hazard Insurance

Purchasing a home is a big purchase, and you’ll want to make sure that you are protected from different types of perils and damage.

The Insurance Center of North Jersey will help you obtain adequate hazard insurance, like fire and hazard coverage on your homeowners policy, to give you peace of mind.

Hazard insurance is the financial safety net if your home is impacted by the unexpected and needs costly repairs or a total rebuild.  Here at ICNJ, we can help you build a customized homeowners policy that includes the right amount of hazard insurance for your needs.

Let us help!  Contact us today to get the process started.