What Is Hazard Insurance?
Hazard insurance is a type of property insurance that protects houses and possessions against a specified list of natural or manmade hazards.
Most homeowner’s insurance policies include protection against certain hazards, while other hazards required specific hazard insurance policies.
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Regional insurance markets and common regional hazards will determine what types of hazard insurance are available in a given region, and what types of hazards are included in homeowner’s insurance policies.
Is Hazard Insurance Required?
Banks often cite hazard insurance as a minimum requirement for homeowners seeking a mortgage on a house.
This is a way for the bank to protect its own investment in case of damage.
Homeowner’s insurance generally exceeds the bank’s insurance requirements, and includes things like liability and protection against loss of valuables.
Hazard insurance also refers to extra insurance policies that are generally not required by banks.
For example, a homeowner’s insurance policy on the South Florida coast will generally not provide coverage against hurricanes, since they are a regularly-occurring hazard.
In order to protect against hurricanes, the homeowner will need a hazard insurance policy which specifically protects against hurricanes.
Are There Different Types of Hazard Insurance?
Different hazard insurance policies will specify different lists of hazards which are covered by the policy.
Earthquakes, tornadoes, flooding, and vandalism are examples of hazards that may be covered by a given policy.
There is also a distinction between cash-value and replacement-value hazard insurance policies.
Cash-value policies generally pay the original cost of lost property, adjusted for depreciation. Replacement-value policies pay for a replacement item on the current market, with no adjustment for depreciation.
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