Hazard Insurance: What It Is and What It Isn’t

Written By Charlotte Insurance on September 23, 2019. It has 0 comments.

a couple ready to learn about hazard insurance

Are you buying a new home? Did your mortgage lender tell you that you need hazard insurance as a requirement for the purchase and you can’t go to closing until you have it? You know you need homeowners insurance, but you didn’t know about hazard insurance!

Don’t panic. Hazard insurance isn’t a special kind of coverage that’s going to cost you thousands extra. You probably already have it. Here’s what you need to know about what it is and what it isn’t.

Hazard Insurance vs. Homeowners Insurance

Contrary to what you might think, hazard insurance isn’t something separate from your homeowners policy. It’s actually a part of your coverage. When you purchase homeowners insurance and read which “perils” are covered, you’re looking at your hazard insurance.

It’s the part of your homeowners policy that pays to replace the contents and structure of your home after a natural disaster. Without this coverage, you’d pay the full expense of replacing your home and your personal belongings after a fire or hail damage, among several other perils.

What Hazard Insurance Covers

Every insurance policy is different, so not every potential peril will be included in every single policy. When you sit down with an independent insurance agent, they’ll show you different options and can explain what is and isn’t covered by your hazard insurance. There are 16 potential hazards that could be included:

  • Fire or smoke
  • Lightning, hail, or windstorms
  • Theft or vandalism
  • Damage from vehicles or aircraft
  • Explosions
  • Civic commotions/unrest or riots
  • Volcanic eruptions
  • Accidental overflow or discharge of steam or water
  • Freezing of your HVAC system
  • Falling objects
  • Sudden or accidental damage from electricity
  • Weight of sleet, snow, or ice

When selecting your hazard policy coverage, purchase the amount of insurance you need to fully rebuild your home and replace all of your personal belongings in case of total destruction and loss from a covered peril. Base your policy limit on replacement costs, not actual cash value, so the total amount of rebuilding is covered.

What Hazard Insurance Doesn’t Cover

Although liability coverage for bodily injury and property damage are included in your homeowners insurance policy, it’s not covered under hazard insurance. It’s a separate part of your coverage with its own policy limits and exclusions.

Hazard insurance also doesn’t cover certain natural disasters. In many cases, additional coverage can be purchased instead:

  • Flooding
  • Earthquakes
  • Landslides
  • Mudslides

Flood insurance is recommended for all homeowners, even if you’re not located in a high risk flood zone.

How Much Does Hazard Insurance Cost?

Like every other part of your insurance coverage, several factors determine your insurance costs:

  • Policy limits
  • Deductible
  • Past claims
  • Age of home
  • Value of your home
  • Security features you’ve added
  • Material your home is made of

When you’re ready to purchase a new homeowners policy while buying a new home, it’s important to ask a lot of questions and understand your options. Even existing homeowners need a refresher from time to time to know what’s included in their policy. When you have questions about your hazard insurance coverage or you need a new homeowners policy, contact Charlotte Insurance Agency.

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