Hazard Insurance vs Homeowners Insurance

May 26, 2019 (0) comment

hazard insurance vs homeowners insurance

​Trying to navigate the purchase of a home can be very complicated, especially when the mortgage company brings up the words Hazard Insurance. But here’s the thing:

Learning the difference between hazard insurance and homeowners insurance isn’t that complicated and that by the time you finish this article, you will be a semi-pro at it.

hazard insurance vs homeowners insurance

​In this post today, I will go over the differences and similarities of hazard insurance and home insurance.

​In This Article



​Is Hazard Insurance The Same As Home​ Insurance?

​To take out a mortgage on a home, your mortgage provider will require you to purchase hazard insurance to protect your home against specific hazards.

The reason people get the two mixed up is that the mortgage company only cares about the real home being protected.

You can’t actually purchase Hazard coverage as a stand-alone policy, and it is not the same as a home insurance policy.

However, it is a part of a homeowners insurance policy.

Think of it like this:  

If you purchase a laptop computer it comes with several parts included; the keyboard, the computer (motherboard, processor, etc.), the monitor (the screen), and the cd drive all in one.

Once you remove the keyboard, you only have a monitor and a computer.

If you remove the computer, you will only have a keyboard and a monitor, and finally, if you remove the monitor, you only have a keyboard and a computer.

Each part alone doesn’t add up to much, but together they create a Laptop Computer.

The Hazard part of a homeowners policy is all about coverage for your home and personal property if you suffer a covered loss.

The other parts of a home insurance policy are liability, medical payments, loss of use, and other structures coverage.

Together all of these parts of coverage make up a homeowners insurance policy.

​What Is Homeowners Insurance?

Homeowners insurance in its purest form is protection against the loss of your physical home, personal property, and things around or attached to your home from specific perils.

There are in total 8 different types of homeowners insurance, and they vary by the number of perils they offer coverage for and the type of homes they offer coverage for.

The most common type of homeowners policy is known as an H03 policy, but we detail them all below:


​Policy


​Who Is It For


​Sub-Policies


​What's Covered?


HO-1-Basic Form


Homeowners


Hazard


Damage to the structure of your home caused by 10 named perils 


HO-2-​Broad Form


Homeowners


Hazard + Personal Property


Damage to the structure of your home and personal property caused by 16 named perils


HO-3-​Special Form


Homeowners


Hazard + Personal Property + Liability + ALE


Damage to the structure of your home and personal property caused by open perils, lawsuits filed against you, and the costs of temporary relocation


HO-4-​Tenant's Form


Renters


Personal Property + Liability + ALE


Damage to the structure of your home and personal property caused by open perils, lawsuits filed against you, and the costs of temporary relocation


HO-5-​Comprehensive Form


Homeowners


Hazard + Personal Property + Liability + ALE


Damage to the structure of your home and personal property caused by open perils, protection against liability lawsuits, and the costs of of temporary relocation


HO-​6-​Condo Form


Condo/Co-Op owners


Hazard + Personal Property + Liability + ALE


Damage to certain parts of your of your home and personal property caused by 16 named perils, lawsuits filed against you, and the costs of temporary relocation


HO-7-Mobile Home Form


Mobile Home Owners


Hazard + Personal Property + Liability + ALE


​Damage to the structure of your mobile home and personal property caused by 16 named perils, lawsuits filed against you, and the costs of temporary relocation


HO-8-​Older Home Form


​Owners of old or historic/landmark homes


Hazard + Personal Property + Liability + ALE


​Damage to the structure of your home and personal property caused by 16 named perils, lawsuits filed against you, and the costs of temporary relocation

​Parts Of Coverage

There are a total of around six different types of coverages, and they all serve their own purpose.

Three specific coverages actually form the hazard portion of your home insurance policy, and these are:

Dwelling Coverage - This covers the structure of your home, the roof, and foundation.

Other Structures Coverage - This covers structures that aren’t connected to your home like a garage, shed, or dog house.

Personal Property Coverage - This covers your personal items inside and outside of the home like clothes and personal electronics.

The other coverages are:

Loss Of Use Coverage - Coverage that kicks in if you are forced to live somewhere else because your home is uninhabitable due to a covered loss.

Personal Liability Coverage - If someone is injured in your home and decides to sue you, this coverage would kick into action.

Medical Payments Coverage
- If a visitor to your home is injured in your home, this will cover their medical expenses.

The Types Of Reimbursement

There are two types of reimbursement that you can have when looking into a homeowners insurance policy.  

The type of reimbursement you choose can ultimately affect the effectiveness of your policy.

So:

It is essential to understand which type you should have and how your policy works in general.

These reimbursement methods are:

Actual Cash Value (ACV) - These policies will be the most affordable and usually are required for older homes; however, they offer the smallest reimbursement for damages.

This policy will only reimburse you for what your home or personal property was worth at the time the covered loss happened.

For example:

If you purchased a Laptop in 2015 for $3,000 and your home is burglarized, an ACV policy will only pay you what the Laptop is worth today, maybe $500 bucks if you are lucky.

Replacement Cost Value (RCV) - These policies are going to be more expensive but will give you the most protection in making sure you don’t have to come out of pocket to cover expenses.

This policy is going to reimburse you for the full cost to replace the item that was destroyed during a covered loss.

Using the same example above, if you purchased a $3,000 laptop in 2015 and had a covered loss happen today, the RCV policy would give you the funds to replace the $3,000 laptop.

​What Is Hazard Insurance?

​​In "Plain English," hazard insurance protects your physical house, other structures near or attached to your home, and your personal property from hazards covered by your policy.

There are two different types of policies that determine which hazards are covered, they are called:

Named Peril Policies

These policies protect your home and personal property against 16 perils that are "named" in your policy, these include:

  • ​Fire or smoke
  • ​Lightning
  • ​Hail and windstorms
  • ​Theft
  • ​Vandalism
  • ​Damage from vehicles
  • ​Damage from aircraft
  • ​Explosions
  • ​Riots and civil commotion
  • ​Volcanic eruption
  • ​Accidental discharge or overflow of water or steam
  • ​Falling objects
  • ​Freezing of household systems like AC or heating
  • ​Accidental damage from an electrical current
  • ​Weight of ice, snow, or sleet

Open Peril Policies

​These policies protect your home from everything except the perils listed in your policy, these can include:

  • ​Earth movement
  • ​Ordinance of law
  • ​Gradual Water damage
  • ​Power failure
  • ​Neglect
  • ​War
  • ​Nuclear hazard
  • ​Intentional loss
  • ​Government action
  • ​Collapse of structures
  • ​Theft to your house if its under construction
  • ​Vandalism (if home is vacant for more than 60 days)
  • ​Mold, fungus, or wet rot (​policy specific)
  • ​Wear and tear
  • ​Mechanical breakdown
  • ​Smog, rust, and corrosion
  • ​Smoke from industrial operations
  • ​Discharge or seepage of pollutants
  • ​Birds, vermin, rodents, and insects
  • ​Animals that you own

Earthquakes & Floods Not Included

Two types of coverage you won't find included in any type of homeowners policy will be coverage for earthquakes or floods.

You will need to get separate coverage for those two types of loss.

​Take Action

​Now that you understand that Hazard insurance is just a part of your homeowner's insurance policy, it's time to get covered.

If you haven't started the search, you should check out our Hippo Insurance Review.

A recent study showed that over 70% of people don't shop for their homeowner's coverage, so don't be part of that statistic.

Hippo has one of the fastest processes for getting coverage and some of the most affordable rates in the industry.

You can also get a home insurance quote in 60 seconds if you are ready.


Sa El is the Co-Founder & CEO of Simply Insurance. He is a Licensed Life and Health Insurance Agent with over 11 years of experience in the industry. He is an Entrepreneur, Insurance Educator and Field Underwriter. Sa is on a Journey to get 1 Million Families insured.

All posts by Mark Mathon

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