Home Hazard Insurance: What You Need to Know
Home hazard insurance is a key component of a standard homeowners insurance policy. It covers the cost of repairing or rebuilding your home if it is damaged by certain hazards or risks. Some common hazards that are usually covered by homeowners insurance are:
- Fire
- Theft
- Vandalism
However, home hazard insurance is not the same as homeowners insurance. Homeowners insurance is a broader term that includes other coverages, such as:
- Personal property insurance, which covers your belongings inside and outside your home
- Liability insurance, which covers legal expenses and medical bills if someone is injured on your property or by your actions
Home hazard insurance is also known as dwelling coverage or building coverage. It is often required by mortgage lenders and loan providers, who want to protect their financial interest in your home until you pay off your loan. They may refer to homeowners insurance as hazard insurance, but they are mainly concerned about the structure of your home.
The amount of home hazard insurance you need depends on the value of your home and the hazards you face. Your policy will list the specific hazards that are covered, such as:
- Fire
- Smoke
- Hail
- Wind
- Ice and snow
Your policy may also cover other structures on your property, such as:
- A detached garage
- A workshop
- Fences
- Sheds
However, not all home hazard insurance policies are the same. Some hazards may not be covered by your policy, such as:
- Flooding
- Earthquakes
- High winds
You may need to purchase additional or separate policies for these hazards, especially if you live in an area where they are common. Before buying a home hazard insurance policy, talk to your insurance agent or company and find out what your policy covers and excludes. You should also ask about any extra coverages you may need to fully protect your home.
– When your home faces a peril, your insurance policy may not cover the whole cost. You may have to chip in with a deductible – an amount you pay before your insurance kicks in.
For example, suppose you have a $2,000 deductible on your home insurance. A strong gust of wind damages your roof, which is a covered peril.
You make a claim
Cost of roof repair: $2,500
Deductible: $2,000 (your share of the bill)
You would pay the first $2,000 out of your pocket, and then your insurance would cover the rest ($500).
But remember, your insurance has a limit – the maximum it will pay for a covered peril. If the cost of the repair exceeds the limit, you have to pay the difference.
Also, some perils are not covered by a standard home policy. You may need to buy extra coverage for things like floods or earthquakes. These extra policies may have their own deductibles too.
– A deductible is what you pay before your insurance pays for a covered loss. It’s usually a fixed amount that’s written on your home policy.
For instance, let’s say your home policy has a $1,000 deductible. Your roof gets damaged by a windstorm, which is a covered loss.
You File a Claim
Roof damage: $1,500
Deductible: $1,000 (what you pay upfront)
You would pay the $1,000 deductible first, and then your insurance would pay the remaining $500
However, there is a limit to how much your insurance will pay for a covered loss. If the repair cost is more than the limit, you have to pay the extra amount.
Also, some losses are not covered by a standard home policy. You may need to get additional coverage for things like earthquakes or floods. These additional policies may have their own deductibles too.
– A deductible is the part of a covered loss that you pay yourself. It’s a set amount that’s on your home policy.
For example, imagine you have a $2,000 deductible on your home policy. A windstorm damages your roof, which is a covered loss.
You File a Claim
Roof damage: $2,500
Deductible: $2,000 (your portion of the cost)
You would pay the $2,000 deductible first, and then your insurance would pay the rest ($500).
But keep in mind, your insurance has a limit – the most it will pay for a covered loss. If the repair cost is higher than the limit, you have to pay the extra amount.
Also, some losses are not covered by a standard home policy. You may need to buy separate coverage for things like floods or earthquakes. These separate policies may have their own deductibles too.
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