When it comes to protecting your home from hazards such as fire, vandalism, hurricane, water damage and etc., hazard insurance can give you the needed financial protection.
Hazard insurance is commonly bought as part of homeowner’s insurance policy.
However, there is a difference between hazard and homeowners insurance. These two insurances are very similar and most often confused with one another.
On this page you will see:
- What is hazard insurance? Definition.
- Hazard insurance vs homeowners insurance
- What is mortgage hazard insurance?
What is Hazard Insurance? Definition.
Before define hazard insurance, let’s see what the word “hazard” mean.
The word “hazard” may have many meanings in the real life but in the terms of insurance, a hazard is a potential cause of loss which can be insured. Of course to receive that kind of insurance you owe a premium.
Examples of hazards for a home are: fire, vandalism, flood, hurricane, explosions, water damage, damage caused by the weight of snow, sleet or ice and etc.
Natural hazards such as floods, hurricanes, earthquakes, windstorms and etc. cause considerable property damage to a huge number of homes in various countries of the world.
That is why hazard insurance is created – to provide a protection against the natural hazards for a fixed property.
So, what is hazard insurance?
Hazard insurance is a type of insurance policies which gives you a financial protection against possible hazards.
In other words, hazard insurance policy provides coverage for damage caused by certain hazards. As an owner, you are entitled to receive a compensation if the event is included in the insurance policy.
Unfortunately, sometimes we face damages that are naturally occurring, like fire, earthquakes, flood and etc.
The hazard insurance policy pays for the financial needs that you as an owner may face in a result of these emergencies.
In addition to that, hazard insurance policies can protect against different hazards, depending on the typical risks for a particular geographical area of the home.
The insurance companies have studied the hazards that can possibly occur in a particular location and make an insurance policy for it.
Hazard Insurance VS Homeowners Insurance
Many people think that homeowner’s insurance and hazard insurance are the same. However, they are not.
What is the difference?
As we mentioned above, hazard insurance is usually bought as part of your homeowner’s insurance policy.
And the big difference is that homeowner’s insurance also contains liability insurance!
Liability insurance is there to pay costs such as medical bills if someone is injured on your property, or/and legal expenses if he decides to sue you because of the accident.
Homeowner’s insurance combines hazard insurance with liability coverage! It protects you from a financial liability in case someone is accidentally injured on your property, regardless of fault.
This policy may also cover any damage that your pets cause on other people’s property, but not your own.
Homeowner’s insurance is the most common type of insurance for homes.
What is Mortgage Hazard Insurance?
If you about to have a mortgage, you know that the most mortgage holders require you to have a hazard insurance.
Commonly, you have to provide proof of hazard insurance when you finalize your mortgage.
Your home is one of your largest investments. So, it makes sense to protect it, doesn’t it?
For example, if your home is totally destroyed (due to a hazard event), the insurance company, depending on the terms and conditions of the policy, have to pay for the replacement value of the home.
Your lender requires you to take a hazard insurance policy on your mortgaged house for at least the amount of the mortgage. The loan will not be approved unless you do so.
In case, of a loss, the insurance will be used to repair/rebuild the property or to pay off the mortgage loan.
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