Hazard insurance protects your home from damage and is required by your lender

  • Hazard insurance is part of a homeowner’s policy that protects against damage from fire, weather, and other natural events.
  • Floods and earthquakes are two major categories of disaster insurance.
  • Your lender will let you know the minimum amount required, but you may need more.

Homeowners insurance is made up of several parts. One is called casualty insurance, which is also called home security. Lenders want to protect their money in your home.

What is risk insurance?

Hazard insurance is part of your homeowner’s policy that protects against damage from natural disasters such as fire, storms, hail, and other natural disasters. New home buyers are sometimes confused by the wording in their mortgage documents that says they need to purchase hazard insurance, often thinking it’s some kind of extra coverage outside of the homeowner’s policy.

“Casualty insurance refers to one part, called Coverage A, of property insurance,” says Brittany Alexander, of Premier Property Law. “Coverage A covers damage to the home such as the roof, walls, and windows. Personal property and liabilities are covered under other sections.”

When damage occurs, if the cause of the damage is listed in your policy, you will be paid up to and including the cost of rebuilding your home based on the amount of coverage you have and the amount of damage you cause.

Accident insurance is not a legal requirement. But if you have a loan, the lender will want to secure their money in your home. Also, your lender’s right to require you to carry risk insurance is protected by law until the lender can foreclose and charge you if they have reason to believe you have not complied. have support.

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What does hazard insurance cover?

If your house or buildings are damaged or destroyed, the risk insurance is triggered.

“Casualty insurance covers the cost of damage to your home caused by natural or man-made disasters, such as fire, lightning, hail and even vandalism,” says Steve Wilson, Sr. manager of Palo Alto, California insurance company Hippo.

“Where homeowner’s insurance covers a wide range of risks, casualty insurance covers the condition of your home, such as its walls, floor and roof, and provides financial support for replacing or repairing your home,” he says.

Perils are listed as perils in homeowner’s insurance policies. Critical risk insurance covers loss or damage caused by the following incidents:

  • Fire and smoke including maintenance costs for your home, buildings, and property
  • The wind such as tornadoes, hurricanes, tornadoes, thunderstorms, and microbursts
  • See you including damage to the roof, siding, and interior of a building when wind-driven snow enters the building
  • An explosion due to gas leaks, improperly installed gas lines or electrical equipment, nearby explosions that damage your home, and explosions caused by non-covered perils such as earthquakes or floods.
  • Stealing including damage to your home or other buildings due to break-in, theft, or damage to your property
  • Destroying things it’s malicious damage that results in broken windows and lights, damage to your property, and basically anything that happens without your permission.
  • Fallen thingsusually prices, as long as you are not considered negligent and the damage occurs to the covered price or item
  • Snow, sleet or ice They are often caused by the weight of the material, freezing and thawing, or damage where snow, sleet, or ice is blown by the wind.
  • Water (except for flooding) due to a burst pipe, leaking water heater or other appliance but not due to poor maintenance.
  • A lot of energy due to lightning strikes or power company operations
  • Civil unrest or riots which results in damage to buildings or personal property

What is risk insurance?

While casualty insurance has a number of advantages, it has limitations, says Wilson.

“Some natural hazards, such as earthquakes, floods and hurricanes, will not be covered under a standard policy, so if you live in a high-risk area, you may need to consider other types of flood, hurricane or earthquake insurance.”

Some risks not covered include:

  • Mold damage, a factor that makes uncovering mold in a pre-purchase inspection necessary
  • Diseases due to termites, rats, or other vermin, something that should be uncovered by a good home inspector.
  • Home office including business assets and supply assets must be disclosed and acquired separately or they are not provided
  • Animals those who are considered exotic or rare may need special treatment, including for problems that are not part of the standard security system
  • Jewelry, art, or heirlooms and other valuables receive a small amount which means you need to declare them and make sure they are fully covered
  • Swimming pools they are usually not covered, even a garage or a closed garage

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How much risk insurance do you need?

The minimum insurance you will need will be set by your lender but many experts suggest a more detailed approach than just relying on that number.

“Each lender has specific requirements about how to sell and how much money a buyer needs to get a loan,” says Alexander. “Items include the cost of rebuilding the house in today’s market. Be aware that the amount of money you pay may not be the same as the amount you paid for the house, because part of the purchase price includes property insurance and risks only affect the house. structure.”

Bill Martin, president and CEO at Plymouth Rock Home Assurance, also emphasizes the importance of replacement cost.

“The amount of money you need is determined by the cost of rebuilding your home, not its market value,” he says. “You need to have enough home security to rebuild your home from scratch if you lose it.”

Wilson emphasizes that it’s also important to include coverage for your property in your homeowner’s policy because your property is not part of the risk insurance policy. “If you are not sure about the coverage you need, ask your insurance agent to help you with questions as you choose the best coverage,” he advises.

A very important point

If the lender says you need accident insurance to get a loan, remember that it’s part of your homeowner’s policy, not an add-on. The minimum requirement stated by the lender may be less than the total cost of building your home from the ground up, so a thorough inspection is necessary to ensure that you do not have less coverage than you need.

Finally, identify special hazards such as hurricanes, earthquakes, or floods that may require separate coverage if they are common in the area where your home is located. Your home is probably your biggest asset. The peace of mind you can have with comprehensive coverage is well worth the cost.