Hazard insurance, also known as dwelling coverage, is a type of insurance that protects homeowners from losses and damages caused by specific hazards (also referred to as perils) such as fires, hail/sleet, or vandalism. It is interchangeable with dwelling coverage because it refers to a list of perils that your homeowners policy insures your physical structure against.
The reason “Hazard insurance” is a commonly used term is due to its association with mortgage lenders, who typically require coverage for the physical structure of a home as a condition of the loan and refer to it as ‘hazard insurance’. Hazard insurance is the part of a homeowners insurance, you usually don’t buy it on its own.
Hazard insurance and a “hazard” are not the same thing. “Hazard insurance” is a term that mortgage lenders often use to describe coverage for the physical structure of a home, also known as dwelling coverage, a “hazard” refers to a potential source of harm or danger.
How does hazard insurance work?
Hazard insurance works by providing financial protection to homeowners in the event of a covered loss. When a loss occurs, the homeowner will file a claim with their insurance company, who will then send an adjuster to assess the damage and determine the amount of the loss. The insurance company will then pay out the claim to the homeowner, up to the limits of the policy.
What does hazard insurance cover?
Hazard insurance typically covers damage to the physical structure of the home, such as the walls, roof, and foundation. Additionally, it typically helps cover any attached structures, such as a garage or deck, as long as the structure is attached to your house. If damage to an attached structure occurs as the result of a covered peril, your hazard insurance may help cover the costs to repair or rebuild it. Structures like a deck or front and back porch may also be considered a part of your dwelling, and therefore may be covered by the dwelling coverage in your homeowners insurance policy.
What doesn’t hazard insurance cover?
Hazard insurance typically does not cover the following:
- Service line coverage: This coverage is needed to repair or replace utility lines that run to your home such as electricity, gas, or water lines.
- Sewer backup/Sump pump coverage: This coverage is needed to repair damages caused by sewer backups or sump pump failure.
- Maintenance damage: This coverage is needed to repair damages caused by neglect or poor maintenance, such as mold or rot.
- Earthquakes: This coverage is needed to repair damages caused by earthquakes, which require separate policies.
- Flooding: This coverage is needed to repair damages caused by floods, which also require separate policies.
Is hazard insurance the same as homeowners insurance?
No, hazard insurance is just a part of homeowners insurance. Homeowners insurance is a more comprehensive type of insurance that includes hazard insurance (dwelling protection), as well as liability protection, other structures coverage, personal property coverage and coverage for additional living expenses.
What is hazard insurance on my mortgage?
When you take out a mortgage to purchase a home, the lender will typically require that you have dwelling insurance in place to protect their investment in the property. This is known as mortgage hazard insurance, and it is typically required as a condition of the loan.
Who needs to get hazard insurance?
Homeowners should get hazard insurance, as it protects their investment in the home. If a homeowner has a mortgage, the lender will typically require that they have hazard insurance in place as a condition of the loan. Renters can also purchase renter’s insurance, which includes hazard insurance. It’s advisable to have hazard insurance to protect yourself and your assets from the unexpected events.
How to find the best hazard insurance policy?
When looking for the best hazard insurance policy, it’s important to shop around and compare quotes from multiple insurance companies. Here are a few things to consider when comparing policies:
- Coverage limits: Make sure the policy provides enough coverage to fully protect your home and personal belongings.
- Additional living expenses: Look for a policy that provides coverage for additional living expenses in the event that your home becomes uninhabitable due to damage.
- Discounts: Ask about any available discounts, such as a multi-policy discount if you bundle your hazard insurance with other types of insurance.
- Customer service: Read online reviews and check the company’s rating with the Better Business Bureau to see how they handle claims and customer service.
- Endorsements: Some insurance companies offer endorsements that can be added to the policy for an additional cost, such as coverage for valuable items such as jewelry, art, or collectibles.