The Difference Between Hazard Insurance and Homeowners Insurance

When a lot of people think of homeowner’s insurance, the first thing that pops into their head is actually hazard insurance. It’s a simple mistake because you’d think the homeowner’s policy actually protects the home. But the specific types of protection that people think of – loss or damage due to fires, hailstorms, tornadoes and so on – are actually covered in your hazard policy. Here’s a quick look homeowner’s insurance versus hazard insurance.

Homeowner’s Insurance

Your homeowner policy is a really big agreement that covers a wide range of things – minus the risks that are covered in a hazard policy. A homeowner’s insurance policy will replace your personal items, pay medical bills and cover other liability issues that may come up (like if your tree falls on your neighbor’s car). Hazard insurance is usually a sub-category within your bigger homeowner policy.

Hazard Insurance

Hazard insurance pays repair or replacement costs when structural damage occurs to your home. It’s also sometimes referred to as peril insurance. Heavy winds, vandalism, fire, smoke damage, pipes that break when it freezes, and other “hazards” are covered by hazard insurance. There are also two types of hazard insurance to know about:

Named Hazards: In a named hazard policy, your home’s structure is protected from specific named hazards. As long as the hazard is named in the policy, your home is protected in that eventuality. A named hazard policy generally covers the most common types of hazards in your particular area, but it may exclude out-of-the-ordinary hazards like earthquakes.

Open Hazards: An open-hazard policy will likely have a higher monthly premium, but the coverage is open-ended. If your home is damaged by something extraordinary that wouldn’t normally be listed in a named hazards policy, the insurance will still pay for repairs.

Your mortgage lender will likely require you to carry a homeowner’s policy that includes hazard coverage. If you’re thinking of buying a home or if you’re interested in a new homeowner’s policy on your existing home, give us a call today.