Hazard Insurance

What is Hazard Insurance?

Hazard insurance refers to coverage that provides protection against damage. The damage could be caused by fires, severe storms, hail or other natural events. The owner of the property will receive the due compensation of any damage caused by such natural events as long as required provisions are made in the policy.

Usually, the owner of the property will be required to pay a premium for a year during the time of purchasing the policy. However, though hazard insurance is similar at many fronts as catastrophe insurance, it is also very different at various fronts. In the insurance Industry, hazard insurance is insurance for homeowners. The insurance protects the home while catastrophe insurance refers to a freestanding policy covering certain natural and man-made disasters.

How does Hazard Insurance Work?

Hazard insurance is usually a sub-section of the insurance policy that homeowners take. The amount required also depends on the cost that would incur to replace the home in the event of a total loss. The value of the dollar may be different significantly from the property’s value on the current Real Estate Market. These policies are usually drafted for a year and can be renewed every year.

Hazard insurance will cover structure, roof and the foundation of the home. Some policies also cover furnishings and other personal belongings.

Mortgages and Hazard Insurance

If you are opting for a mortgage on your home, the lender will require you to also have a home owner’s insurance. This insurance should typically be the hazard insurance policy since a major portion of the home owner’s insurance policy is directly connected to the structure and the keeping of the home itself.

If your home is situated in an area of high-risk to damage by natural disasters, the lender may require you to have additional coverage. This coverage would mean to have an additional flood insurance policy, etc along with hazard insurance policy.