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What is Hazard Insurance?

Michael Pollick
Michael Pollick
Michael Pollick
Michael Pollick

Hazard insurance, also called homeowner's or property insurance, provides coverage for specific natural hazards, such as fire, wind, earthquakes and vandalism. Many homeowners purchase a "comprehensive" form of insurance first, which may include most common damages, but then seek additional coverage for specific dangers. Those who live in flood plains may buy insurance for water damage, for example, while homeowners in California may add earthquake insurance.

Since there may be a definable difference between homeowner's insurance and hazard insurance, it pays to ask the insurance broker about coverage before agreeing to the contract. Some comprehensive policies already provide coverage for certain hazards, so additional insurance may not be strictly necessary. Others may not fully cover hazards specific to the area, such as damage caused by a breeched dam or vandalism during construction. Truly comprehensive home insurance should cover both liability and physical damages. A hazard policy is usually geared towards physical property damage, rather than owner liability for accidents on the premises.

A hazard insurance agreement.
A hazard insurance agreement.

During the closing of a property sale, the buyer is almost always required to obtain some form of hazard insurance. The terminology for this coverage may change to property insurance or comprehensive homeowner's insurance, but it all means the same thing to the closing attorneys and lenders. Buyers are strongly encouraged to buy at least enough insurance to cover the cost of the mortgage, which will provide enough protection to restore the property if it burns to the ground the day after the sale is complete.

Some homeowners may need separate insurance coverage for hazards like hurricanes.
Some homeowners may need separate insurance coverage for hazards like hurricanes.

Premiums for this type of insurance are generally calculated on the appraised value of the property, the age of the building, construction methods and known natural hazards in the area. Insurance agencies may offer additional hazard policies such as flood, earthquake and hurricane coverage, but homeowners may have to weigh the benefits against the higher premiums. Some policies may sound frivolous, but the damage caused by a rare earthquake in North Carolina, for example, could be substantial. Hurricane insurance in Florida may sound automatic, but some homeowners may save money on premiums by not adding it to a comprehensive policy, as the damage may be covered without the need for extra coverage.

Michael Pollick
Michael Pollick

A regular SmartCapitalMind contributor, Michael enjoys doing research in order to satisfy his wide-ranging curiosity about a variety of arcane topics. Before becoming a professional writer, Michael worked as an English tutor, poet, voice-over artist, and DJ.

Learn more...
Michael Pollick
Michael Pollick

A regular SmartCapitalMind contributor, Michael enjoys doing research in order to satisfy his wide-ranging curiosity about a variety of arcane topics. Before becoming a professional writer, Michael worked as an English tutor, poet, voice-over artist, and DJ.

Learn more...

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Discussion Comments

anon42316

does hazard insurance cover leaks, water damage and mildrew?

colsanders

can i make claims on hazard insurance?

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    • A hazard insurance agreement.
      By: alexskopje
      A hazard insurance agreement.
    • Some homeowners may need separate insurance coverage for hazards like hurricanes.
      By: Brian Nolan
      Some homeowners may need separate insurance coverage for hazards like hurricanes.
    • Hazard insurance is coverage for buildings that may be prone to earthquakes.
      By: robepco
      Hazard insurance is coverage for buildings that may be prone to earthquakes.
    • Hazard insurance policies may protect against vandalism in high crime areas.
      By: Sergey Mostovoy
      Hazard insurance policies may protect against vandalism in high crime areas.
    • Some insurance policies may include specific coverage guidelines for fire hazards.
      By: Tatiana Belova
      Some insurance policies may include specific coverage guidelines for fire hazards.