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Hazard InsuranceHazard insurance covers damages to property that are the result of fires, natural disasters, and other hazards. Depending upon the region in which you live, lenders may require additional hazard insurance coverage for physical damages resulting from earthquakes, hurricanes, or floods. Hazard Insurance vs. Homeowner's Insurance Many people assume that their home is insured for whatever accident might come their way. They think that because they pay their homeowner's insurance every month, this will keep their home safe. The truth is, homeowner's insurance combines aspects of hazard insurance and liability insurance. Liability insurance protects a homeowner in the cases of alleged negligence or other inappropriate action that results injury or property damage. Insurance is a complex product and policies are written in long-winded legal jargon. It's important for you to identify what your insurance does and does not cover. Homeowner's insurance policies cover specific perils, or hazards, and the more perils a policy covers, the higher the premium becomes. Basic policies cover the most common perils like broken windows, fire, smoke damage, explosions, etc. To insure against damages from snow, flooding, earthquakes, and even wars, different levels of policy coverages are available with homeowner's insurance. If you live in an area that can be damaged by a certain type of disaster, and you try to cut corners when choosing an insurance policy, you'll pay for it later if disaster ever strikes. Know your policy and your risks, and buy the right insurance. Look for replacement value insurance, and if you have valuables in your home, like electronics, jewelry, furs, or collectibles, consider buying floater or endorsement insurance to cover these items as well. Earthquake Insurance If you live in California, coastal areas of the West Coast, or in Missouri near the New Madrid fault, you might want to seriously consider earthquake insurance. While earthquake insurance is not a mandated coverage required by lenders, it makes a lot of sense, especially given the values of property in California. Earthquake insurance can be purchased through an insurance company or state agencies such as the California Earthquake Authority (CEA). Lower rates can usually be found with carriers that write only earthquake policies. Costs vary depending upon the:
Deductibles must be paid prior to collecting on this type of insurance and they are calculated as a percentage of the coverage value. Flood Insurance Flooding is the most common of natural disasters, so if you live in a flood plain or close to a lake, river, or ocean, flood insurance can be a very smart investment. If the government has deemed your area a flood plain, lenders will require you to have flood insurance. Flood insurance is offered by the National Flood Insurance Program (NFIP). Check with your local insurance agent to see if they contract with NFIP before contacting them directly. Wind Insurance Wind insurance protects against damages done by hurricane and tornado winds. Certain areas, such as Florida or the Jersey Shore, will have higher premium rates due to greater risk. State agencies and private insurers offer these products.
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