If reading this, there’s a good chance you might probably be wondering what is hazard insurance. Well, this is merely a coverage that protects a property owner against damaged caused by fires, sever storms, hail, or other natural events. Provided the specific weather event is covered within the policy, the property owner will get compensation to cover the cost of any damage incurred.
Actually, the property owner will have to pay for their premiums with an escrow account, but this practice depends on the exact details of the policy. In some cases, hazard insurance is often considered synonymous with catastrophe insurance. However, both deal with coverage for large-scale, natural disasters, they’re technically different.
Within the insurance sphere, hazard insurance refers to a portion of a general homeowners insurance policy that protects the structure of the home. Catastrophe insurance usually refers to a separate, freestanding policy covering specific types of disaster, including man-made ones.
It is worth noting that hazard coverage is usually a subsection of a homeowners insurance policy that protects the main dwelling and other nearby structures, such as a garage. To perfectly prepare for every contingency, homeowners need to be sure that specific, common hazards are covered in their insurance policy package.
The amount of hazard insurance you needs depends on what it would cost to replace the home in the event of a total loss. This dollar amount tends to differ immensely from the property’s value on the current real estate market. Keep in mind policies are typically written for one year and are renewable.
Homeowners can often decide to beef up the hazard coverage of their policy. It is in your best interest to pay the upfront costs of extra hazard insurance than to make do with the associated legal and medical problems out of pocket. As severe weather events become more prevalent in different parts of the world, increased hazard insurance may become necessary for more homeowners.
In case you’re taking out a mortgage on your home, it is quite common for your lender to require you to carry homeowners insurance. Sincerely speaking, what they want you to have been, in fact, hazard coverage since it’s the portion of homeowners insurance directly related to the home structure itself.
Ensure you fully understand what is hazard insurance before you can finally have it as part of your homeowners insurance policy.