When damages like fires, hail/sleet, severe storms, and other natural disasters affect an individual or business property, the coverage that covers it is known as “Hazard insurance”.
As long as the weather event or disaster that affects the property is being listed in the policy. The owner will be compensated to cover the cost of the damage incurred.
At the time of purchasing such a policy, it is required by the policyholder to pay a year’s worth of the premiums. Though purchasing a year’s worth of the premium at the initial time of getting the policy depends on the details of the policy.
Colloquially, hazard insurance is sometimes seen to be the same with catastrophe insurance. Though they both have some similarities of covering large scale natural disasters also know as “Acts of God”, they differ in away.
Withing the insurance company, they refer hazard insurance to be the type that covers the general homeowner’s structure like his home.
While catastrophe insurance is seen to be a different, freestanding policy, that mainly covers some types of a disaster which is mainly man-made.
How Hazard Insurance Works
Like earlier said the insurance protects a property owner. Against the cost involved in the damage of his or her properties caused by fires, hail wind, snow, lightning, rainstorms, and other natural events.
Hazard coverage is a subpart in the terms and policy of homeowner’s insurance. That protects policyholder’s properties and nearby structures like a garage.
To be prepared for all contingency. The policyholder must make sure that common hazards are being covered in their insurance package.
The money for hazard insurance mostly depends on the total money to replace the house in the case of a total loss.
However, the amount can be different base on the property value, and policies are written and renewable for one year.
Hazard Insurance Mortgage
It is proper and common for lenders to ensure their borrowers take homeowner’s insurance while taking out a mortgage.
But the major thing lenders want you to have is, in fact, hazard coverage. Since it is already part of the homeowner insurance that is relating to the structure of the house already.
However, when a borrower purchases a homeowner’s insurance it satisfies the lender’s requirement. Although the law is to provide some level of protection of other special considerations and local municipality.
If your property is very expensive and it is located in a risky area. The lender might suggest or require you to take additional coverage.
Separate Hazard Insurance Policies
In some locations, in the homeowner’s insurance policy, some natural or weather disasters are excluded from the hazard coverage.
This is because the area is prone to those disasters. And will be too costly for the insurance company to get them into their standard policy.
For instance, California properties that are located at fault zones are subjected to earthquakes threats. And also Florida beachfront is prone to be wiped by hurricanes or tropical storms.
A separate hazard insurance policy is required by homeowners that live in a risky location. They can get separate hazard insurance such as flood insurance policy. Or a special and separate policy that will protect them from sinkholes and landslides.