If you are a new or potential homeowner, you must have come across the term Hazard Insurance from your real estate agent or mortgage company. This must be confusing as you are probably more familiar with homeowners insurance. The question that must be running through your head is “do I need to get a separate hazard insurance policy from the standard homeowners’ insurance?” The answer is no! Though technically different, almost all homeowner insurance policies have hazard insurance embedded in them. So, what then is Hazard insurance and why do you need it?
Hazard insurance is designed to protect the homeowner against structural damages caused by natural disaster. These occurrences are known in the insurance world as “hazards” hence the term hazard insurance. Hazard insurance covers only damages that occur from natural perils that affects the actual structure of your home and not your personal belongings in your home. The common perils covered under hazard insurance includes, floods, hurricanes, tornado, hail, and smoke. As a homeowner, you want to protect your building from damages and ensure that when these incidents happen you don’t pay out of pocket. For real estate agents and mortgage companies, their primary focus is on the structure of your building and not the content of it hence the term hazard insurance used more frequently in that industry. Under the hazard insurance, if a flood or tornado blows through your home, the policy will help with the repair or rebuilding costs.
Homeowners insurance, on the other hand, takes care of the structural damages as well as loss to personal property in the home. This policy protects you financially from various types of damage which are usually specified in your policy, as well as theft. Homeowners insurance also covers medical bills if someone is injured at your house and any legal costs if they decide to sue you, in addition to damage caused by fire, windstorms, hail, vandalism, and lightning.
The good news is, you do not need a separate hazard policy. In short, there is no insurance policy sold that is labeled “hazard” alone. Your homeowners’ policy already covers that. The only difference is some mortgage companies will ask you to add specific hazards to your policy based on the location of your home or property. For instance, if you live in an area that is plagued constantly with tornados, chances are your mortgage lender will require you to have tornado coverage on your home.
Remember whenever you are in doubt about your policy, talk to your agent for clarification.