What is Hazard Insurance?

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A blog about hazard insurance by Daigle & Travers, Darien, Connecticut (203) 655-6974

What is Hazard Insurance?

Hazard insurance is not a separate type of coverage from a homeowner’s insurance policy. Rather, it usually refers to a certain type of coverage included within a homeowner’s policy that provides protection for the structure of your home.  While the phrase ‘hazard insurance’ is becoming quite prevalent (due in part to usage in the lending industry), typically it simply means a personal homeowner’s policy that protects your home against specific hazards.

Hazard insurance gets its name because of the fact that it covers various ‘hazards’ that can occur in and around your home. These hazards are called “named perils” and often include, but are not limited to:

  • Fire damage
  • Theft
  • Hail damage
  • Vandalism
  • Extreme storms
  • Earthquakes and other natural catastrophes

A homeowner will be compensated (subject to policy terms, conditions, and limitations) to cover the cost of damage incurred as a result of a named peril, as long as the specific event is listed within your policy. There are additional “named perils” to the ones listed above that can be covered and purchased with a more comprehensive policy, but these are the most common.

In the event of being exposed to a named peril, hazard insurance will provide coverage for the contents of your home (subject to policy terms, conditions, and limitations). These include your clothes, furniture, books, and non-attached personal belongings. When it comes to protecting your possessions, there are two types of hazard insurance to choose from.

Two Types of Hazard Insurance

Cash Value

This coverage will replace damaged, stolen, or destroyed items for the price that the item was purchased for, minus the depreciation of the item.

Replacement Value

This coverage provides policyholders with enough money to buy the same item new, without taking depreciation into account. Typically, it is more expensive than the cash value option.

Do I need hazard insurance?

Most mortgage loan providers require hazard insurance as part of your homeowner’s policy, at a minimum, before they consider issuing a loan. For this reason, hazard insurance is important to have. Ideally, you want enough hazard insurance to cover the costs of rebuilding your home. As a general rule of thumb, the larger (livable square footage) and more expensive or ornate your home is, the higher you should set your limit for hazard insurance. Please consult your insurance professional for guidance on coming to the most accurate number.

Hazard insurance may not cover against all storms and all damaged, stolen, or destroyed valuables. For example, if you live in a high-risk area for a particular type of storm, you may need to purchase separate insurance for this. Also, if you have very expensive valuables, such as fine art, or even highly regarded sentimental items, these might not be protected under hazard insurance and  it may be beneficial  to you to purchase a separate “floater” or a personal articles policy.

Would you settle for less?

If you find your current insurance agent is unable to offer you an acceptable hazard/homeowner’s insurance policy, it’s time to find a new agent.

Read over your policy very carefully. Spend time comparing all aspects and not just the prices. Make sure it suits your needs and will help you find the coverage that works for your specific situation.

Here at Daigle & Travers, we can help you find hazard coverage and will recommend policies from the best insurance companies. Give us a call today at (203) 655-6974.