YOU ASK:

Hazard vs Homeowners insurance – what is the difference between the two?

WE ANSWER:

Hazard insurance and homeowners insurance are two terms referring to the same thing. While the latter is more commonly used, the former term is preferred by mortgage lenders which require that their clients purchase at least basic hazard insurance providing protection against losses caused by fire, water, smoke, theft, hail and windstorm, and other perils.

Knowing that the only distinction between hazard and homeowners insurance is in terminology, we can use them interchangeably to refer to the insurance protection against damage or loss that home owners purchase for their residence premises. It is important to know that homeowners insurance can provide basic or broad coverage, depending on the specific needs of each individual home owner.

Why Buy Hazard Insurance

You can't get a mortgage for your home unless you carry some form of homeowners insurance. Mortgage lenders usually expect from their clients to purchase at least minimum hazard insurance for their homes. However, home owners need more than just insurance protection for the premises and their contents. Standard homeowners insurance policies also offer personal property and liability coverage, and protection against the loss of use of a property.

The basic hazard insurance required by mortgage lenders provides coverage on a named-peril basis. This means that if you home is damaged by a peril not specifically named in the insuring agreement of your homeowners policy, you will have to pay for repairs to your dwelling out of your own pocket. This is why it is always advisable that you purchase a broad and more comprehensive coverage if you wish to get adequate compensation in the event of a loss.

Homeowners Insurance Exclusions

Although hazard insurance policies vary from company to company and from state to state, there are several causes-of-loss which are specifically excluded from Homeowners insurance. Losses caused by natural disasters such as hurricanes, floods and earthquakes are not covered under any home insurance policy, but you can usually purchase separate coverage for these perils if you live in a high-risk area.

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