Flood, windstorm, or earthquake — these are everyone’s nightmare — especially for a homeowner! To safeguard your home against these natural disasters, you want your insurance company to work for you incessantly. And, hazard insurance is that part of your home insurance policy that shows you how. 

Many people don’t know the difference between hazard insurance and homeowners’ insurance. The truth is, hazard insurance isn’t a separate policy but a part of your homeowners’ policy itself. 

To be more specific, it’s that part that will pay to replace your home’s structure and your personal property in case of natural disasters. All homeowners’ insurance policies generally come with hazard insurance as it’s an important component. 

What is hazard insurance?

Simply put, hazard insurance is a part of your homeowners’ insurance that’s absolutely essential to keep you, your family, and your house safe. According to the Consumer Financial Protection Bureau (CFPB), hazard insurance is the coverage that your homeowners’ insurance provides specifically for certain risks or perils such as fire, theft, and vandalism.

Your homeowners’ policy, on the other hand, offers a more complete coverage — protecting you from other types of loss, damage, and theft. It even covers medical bills as well as legal bills if someone gets hurt on your property and decides to sue you for their injuries.

Since hazard insurance specifically protects your home and personal belongings from damage caused by a natural disaster, it covers all the damage or loss to the structure of your house or anything else on your property. It could even include a damaged basketball court, an outdoor storage shed, or a detached garage.

How does hazard insurance work?

house insurance

When you have hazard insurance in your homeowners’ policy, it comes into play if a natural disaster damages your home or personal belongings. As a homeowner, you have to pay regular fees for each pay period of your insurance just in case your home is damaged. And, then, when tragedy strikes, all you have to do is file a standard insurance claim and you get reimbursed for the repairs.

Just imagine, without hazard coverage, you’d be footing the entire bill — be it the whopping cost to renovate your home, repair your roof, or replacing the built-in appliances, flooring, or plumbing.

This is the reason why it’s a crucial lender requirement. When you’re buying a new home, most loan lenders will offer you a mortgage loan only if you have hazard insurance included in your homeowners’ insurance coverage. 

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What does hazard insurance cover?

fire breakout

Every insurance company has a list of natural disasters that qualify for its hazard insurance coverage. Generally, such a type of insurance covers hurricanes, tornadoes, blizzards, fire, and explosions. You can always find out what your particular hazard insurance policy covers before signing on the dotted line.

Here are some perils that most hazard insurance cover: 

  • Fire breakout 
  • Lightning
  • Hail, windstorms, or damage due to weight of ice/snow/sleet
  • Theft and vandalism
  • Damage from vehicles or aircraft
  • Freezing of household items such as air conditioners or heating systems
  • Explosions
  • Riots and civil disturbance
  • Volcanic eruption
  • Accidental overflow of water or steam
  • Sudden damage from an electrical current

There are a few natural disasters that standard hazard insurance doesn’t cover, though. These include earthquakes, mudslides, landslides, and flooding. To safeguard your house against these, you’ll have to purchase supplemental insurance, such as flood insurance etc, along with your regular policy. These are generally sold through private insurance providers.

Read more: Snow and ice damage to roofs: prevention, insurance and more

Who should get hazard insurance?

In almost all states, any property owner who has a homeowners’ insurance policy will automatically have hazard insurance. However, not all policies are equal. You’ll have to make sure that your homeowners’ policy gives you a comprehensive, location-specific type of coverage. Ask yourself what you need covering and then opt for an insurance plan accordingly.

For example, if you live in a state that faces a high risk of hurricanes, such as Florida, Louisiana, Texas, North Carolina, and New Jersey, you need a policy that specifically protects against hurricane-related damage. 

If you’re a resident of tornado-prone Oklahoma, Nebraska, or Kansas, you’ll want to have hazard insurance that covers your home in the event of a tornado.

Read more: Why is home insurance so expensive in Texas

How much hazard coverage do you need?

home safety

Your hazard insurance should cover the cost that it will take to replace your home if, God forbid, it’s totally lost to a disaster. This amount is determined by taking into account the cost of your home, its current value on the real estate market, and the cost to replace the appliances and other personal belongings in your house.

Read more: Why do you need manufactured home insurance?

Key takeaways

  • Hazard insurance offers great financial protection against damage caused by fires, hurricanes, and other natural events.
  • It’s a part of your general homeowners’ insurance policy. It protects the structure of your home and gives personal property coverage in the event of a hazard.
  • Mortgage lenders often require you to have homeowners’ insurance before approving your loan application.
  • You may need to purchase separate hazard insurance to cover certain contingencies specific to your geographical location.

Homeowners insurance and hazard insurance are like necessary evils; home insurance costs a lot but is absolutely essential. When tragedy strikes, having good homeowners’ insurance policy, with comprehensive hazard insurance,  will save you a lot of money. 

It will help you rebuild your property…and your life after a natural disaster.

Read more: How to Get Cheap Home Insurance

Everything You Need to Know About Hazard Insurance was last modified: October 5th, 2022 by Ramona Sinha
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