The question of if hazard insurance is the same as homeowners insurance is commonly asked by new and existing home owners. This blog post will answer the question regarding this.
As a new home owner, you need to know the differences to ensure they have good proof of insurance for their mortgage. Also, people who have paid off their mortgages still need to know what is covered under their policy.
When you are shopping around for a home policy, there are different terms you will hear. Understanding the differences between hazard and homeowners insurance can help you know the right coverage for your home.
Is Hazard Insurance the Same as Homeowners Insurance?
No, hazard insurance and homeowners insurance are not technically the same thing. Although they can be used interchangeably, they don’t mean the same thing. Hazard insurance Is part of the home insurance policy. It typically applies to your dwelling or primary residence. A typical home policy includes dwelling coverage (hazard insurance).
- Personal property coverage: It covers personal belongings that are destroyed, damaged, or stolen.
- Liability insurance helps to cover property damage and accidental injuries to other people that you are responsible for, as well as your legal expenses if a person sues you because of damage or injury that is covered by your policy.
- Medical payment: It covers small injuries, such as if a guest falls on your front step, no matter who is responsible.
- Additional living expenses: It covers expenses if you are temporarily displaced from your home because of covered damage.
If you have a home insurance policy, you already have hazard insurance. You don’t have to purchase a separate policy. However, you will have to purchase separate policies if you want earthquake or flood coverage.
What is Hazard Insurance, and What Does it Cover?
Hazard insurance refers to the sections of your homeowners insurance policy that cover your home structure against perils. It is a term that mortgage lenders make use of to describe dwelling coverage, which is one part of the standard home policy. This subsection of policy covers the structure of the house itself.
Also, it is a term that certain lenders make use of to refer to a homeowner’s insurance policy coverage. A policy contains the types of damages that are covered. Below are the standard 16 periods covered by hazard insurance.
- Fire and lightning
- Damage by vehicle
- Smoke
- Explosion
- Riot
- Damage by Aircraft
- Vandalism
- Volcanic eruption
- Weight of snow, ice, or sleet
- Accidental damage to AC, sprinklers, and hot water heaters
- Volcanic eruption
- Accidental discharge of water
- Artificially generated electrical currents
- Freezing of applicants or HVAC
- Falling OBJECT
- Theft
It does not cover damage from mudslides, pests, or floods. Just like I have mentioned above, you will need to purchase separate insurance to cover these issues.
How Much Does Hazard Insurance Cost?
According to research, the national average cost of a home insurance policy is $1,854 in a year. This contains $300,000 of dwelling coverage (hazard). The cost of the home policy depends on several factors, such as your credit, the cost to rebuild your home, your home location, coverage, policy limits, deductible, your personal claim history, and the claim history of the property.
If you really need to purchase hazard insurance as part of your home policy, it is a good choice to shop around. Compare quotes to know how much coverage you need and the amount it will cost.
Do I Need Hazard Insurance?
When you get a mortgage to purchase a house, most lenders require you to have this coverage. It is part of a homeowner’s policy, and you’ll need to show proof of it before the deal is closed. Your insurer can offer an insurance binder to show you have the right coverage.
After you purchase the home, you must keep paying your insurance premiums to maintain coverage. Most of the time, these premiums are included in your mortgage payments through an escrow account. If they’re not and you let the insurance lapse, the lender might buy insurance on your behalf and charge you for it. This is called force-placed insurance and is always very costly.
What if I purchase a house with cash or pay off your mortgage? Do I still need hazard insurance without a lender? Yes, you should still have coverage to help protect your home. If your house gets damaged by a fire, storm, or other disaster, hazard insurance helps cover repair costs. Without it, you will have to pay for it out of your pocket, which can be very expensive.
Even small repairs, like fixing a roof damaged by a storm, can be very expensive at times. If you don’t have enough savings, you may need to make use of high-interest credit cards or loans. And this can lead to financial trouble if the debt builds up. So, having hazard insurance is a good idea in order to protect your home and finances.
