There are many different kinds of insurance that you will have to deal with when you buy or own a home. The hazard insurance vs homeowners insurance discussion is one that every would be homeowner and current homeowner should have with a qualified agent, especially if you do not understand that these are two completely different types of protection! Here are the basics of hazard insurance and homeowners insurance and how they will both protect you and your home in different ways.
What is homeowners insurance?
Homeowners insurance is the insurance that will protect you from financial liability in case someone is accidentally injured on your property, regardless of fault. There are medical and legal protections involved with homeowners insurance that cover physical damage as well as lawsuits.
Homeowners insurance may be used colloquially as an umbrella policy, but most professionals refer to the definition above when using the term. There are many different levels of homeowners insurance; however, the most common is the basic policy that covers three major areas.
First, homeowners insurance usually covers personal belongings that are stored inside of the house such as clothes and furniture. The policy covers these items for theft and for certain disasters like fire, hail, and rain. You may need to participate in a professional home inventory in order to determine the amount of coverage that you need here, because the basic policy may provide too little money for the level of belongings that are in your house.
One of the most important protections of homeowners insurance is a liability protection. This is the coverage that the insurance company gives you for property damage and bodily injury that other people suffer on your property. This coverage may also cover any damage that your pets initiate on other people’s property, but not your own.
Finally, the third major clause in most common homeowners policies is the additional living expenses clause. If your home needs to be repaired or replaced due to an insured hazard or disaster, this is the clause that will cover your living expenses while you are living outside of the home. You will have money for hotel bills, food, and other living expenses. There will usually be a time limitation on the additional living expenses clause, and the amount that you receive for your living expenses is separate from the amount of money that the insurance company will pay to rebuild your home.
What is hazard insurance?
Hazard insurance is part of most common homeowners insurance policies. As a matter of fact, it may be required by the lender as a part of your homeowners insurance in certain instances.
Common hazard insurance covers the structure of the house, and it will pay to rebuild or repair the home if it is damaged by lightning, fire, hail or any other disaster that is specifically named in the policy. It is important to note that floods and earthquakes are never covered in these basic policies. Although floods and earthquakes may be considered hazards just like fire, they are separated culturally in the insurance industry. There are certain municipalities such as California that require a higher level of hazard insurance that covers floods and earthquakes.
You may need to get a special kind of hazard insurance if you are going to have items such as trampolines or playground sets on your property. In most cases, common homeowners insurance does not cover these items. You should always check with your insurance agent if you are unsure of what your insurance policy actually covers. Get everything in writing down to each individual item; otherwise, you may have a problem if you have to face your insurance company in court.
Should I get homeowners insurance or hazard insurance?
If you are using a lender to help fund the purchase of your property, that lender will likely require you to purchase a certain minimum level of homeowners or hazard insurance in order to protect its investment in the real estate. The type and level of insurance the lender will require is dependent on the laws of the municipality and the requirements of the lender.
If you live in an area that is known to play host to certain kinds of weather, then you should make sure that those specific conditions are covered in your insurance package. Most likely, if an area is known for a hazard such as earthquakes, that insurance coverage will not be included in the common package. You will have to purchase a separate addition in order to completely protect your home, and this is where certain higher levels of hazard insurance will become useful to you.
It is much better to pay the upfront costs of extra hazard insurance than deal with the legal and medical problems that will come down the road out of your own pocket. The home is the number one place where accidents occur, and both homeowners and hazard insurance are very important in helping people to weather the storm of unexpected accidents. Part of being a responsible homeowner is being prepared for every contingency. If you are spending hundreds of thousands of dollars on a home, then you should definitely take the extra budget out to afford a few hundred dollars per year for a proper insurance package.
2 Point Highlight
There will usually be a time limitation on the additional living expenses clause, and the amount that you receive for your living expenses is separate from the amount of money that the insurance company will pay to rebuild your home.
The home is the number one place where accidents occur, and both homeowners and hazard insurance are very important in helping people to weather the storm of unexpected accidents.
