Insurance for Natural Disasters In 4 Minutes or Less!


Hazard insurance is a component of your homeowners policy that protects the structure of your house against particular calamities such as fires, hail, storms, and other natural disasters.

Here's everything you need to know about hazard insurance: how it works, what it covers, and when you might need it.

Definition of Hazard Insurance


One of the coverages included in your homes insurance policy is hazard insurance. It protects the structure of your home from losses or damage caused by certain natural calamities, often known as risks or perils. It's the same as the dwelling coverage in your insurance.

Storm damage, fires, and automobile collisions are frequently included as insured hazards. Flooding and earthquakes, on the other hand, are frequently excluded.

Hazard insurance and homeowners insurance are frequently used interchangeably, although they are not the same thing. Hazard insurance is a subset of a homeowners policy's coverage, whereas homeowners insurance covers a wide range of things (other structures on your property, personal property, certain liabilities, and more).

If a mortgage lender requests that you obtain hazard insurance, they are referring to the purchase of homeowners insurance. You can't usually get hazard insurance on its own.

Dwelling insurance; peril insurance are two more names for the same thing.

How Hazard Insurance Works


Your land and structures are important assets that are naturally exposed to the weather. Whether you're a resident or an investor, you don't want to take the chance of leaving them uninsured.

Your mortgage lender, predictably, does not want you to do so. To qualify for financing, most lenders demand that you get a homeowners policy that includes hazard insurance.

Your hazard insurance coverage requires your insurance provider to compensate you for some or all of your losses, less your deductible and up to the policy maximum, if a covered occurrence happens.


NOTE:
You'll get more or less money for your claim depending on whether your insurance covers the actual cash value (ACV) or replacement cost of your home. Replacement cost insurance cover the full cost of replacing the property with something similar in type and quality, generally up to its current value. To account for depreciation, ACV policies reduce that figure.

    Assume you have an ACV homeowners policy with $1,000 deductible and hazard insurance. You return home one day after a storm to find that a tree has fallen into your house, smashing a section of your roof. The repairs will cost $12,000, but your roof has depreciated by $3,000 since you last replaced it. If your claim is approved, you will get $8,000 in insurance profits ($12,000 less depreciation and your deductible).

IMPORTANT:
The cost of rebuilding or upgrading a damaged house to satisfy your city's current building rules might skyrocket due to new construction codes. Ordinance or law coverage, often known as building codes coverage, is an unique rider that may be added to your homeowners insurance policy to cover these additional costs.


What Does Hazard Insurance Cover? 


Hazard insurance protects the structure of your home against specific risks. The specific risks covered vary depending on your coverage, but they frequently include:
  • Fire
  • Hail
  • Lightning
  • Theft
  • Vandalism
  • Fallen trees
  • Vehicles that run into your home
  • Explosions
NOTE:
If your insurance covers trees that are blown over, don't assume it covers water damage from storms. Flooding and earthquake damage are often excluded from hazard insurance policies. To cover certain types of damage, you'll likely need to purchase additional insurance.

Do I Need Hazard Insurance?


Hazard insurance is typically included in a larger homeowners insurance policy, so any circumstance in which you might need to cover a property that you own will almost certainly necessitate purchasing hazard insurance.

When you're seeking to close on a mortgage, this is most likely to happen. Before you can close, your lender will usually advise you to get a homeowners policy with enough hazard insurance. After all, the house is the lender's collateral.

Even if you own your home entirely, you should still get hazard insurance to safeguard your investment.

Hazard insurance is unlikely to be necessary if you are renting your home. Instead, because it protects the structure itself, your landlord or whomever owns the building would have this coverage. A renters insurance policy, on the other hand, may cover damage to your items caused by comparable risks.


Key Takeaways

Hazard insurance is a component of your homeowner's policy that protects the structure of your house from natural catastrophes (dwelling coverage).

Hazard insurance often covers damage caused by storms, fires, automobile accidents, and other risks, but not flooding or earthquakes.

If you own real estate, such as land or buildings, you should consider including hazard insurance in your homeowners policy. It's too hazardous to go without, and if you're buying a house with a mortgage, your lender will insist on it.