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Hazard Insurance vs Homeowners Insurance: Key Differences

Hazard insurance and homeowners insurance are key when it comes to protecting your property. But what’s the difference between the two, and how do potential homebuyers pick the right policy? Here’s what you need to know when it comes to home insurance versus homeowners insurance.
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It’s one of the last things a home buyer wants to think about after purchasing a home. But it’s one of the most important: Getting the right insurance coverage. It can be confusing, especially considering the “ins and outs” of hazard insurance versus homeowners insurance.

Does Hazard Insurance Differ from Regular Policies?

The short answer is hazard insurance and homeowners insurance are not two distinct types of coverage. Homeowners insurance is the entire policy, and it includes hazard insurance and contains other coverage, as well.

Homeowners insurance can cover losses that are not physical or part of your property. It can include coverage for loss due to theft, additional living expenses for forced relocation, and personal liability coverage in case of a suit by someone injured on your property.

There are several different types of home insurance policies, and they can include limited coverage, basic coverage, and comprehensive coverage, depending on the policy and your needs.

What is Hazard Insurance?

Think of it this way, hazard insurance is a part of your home insurance policy, but not the entire policy. A home insurance policy will give details on what hazards are covered -- which can vary from policy to policy.

Hazard insurance policies can include coverage against fire, vandalism, lightning, theft, and windstorms. They can also cover such things as explosions, damage caused by debris from aircraft or from falling aircraft.

These policies can also reimburse policyholders for damages from riots or civil unrest, freezing pipes, excessive snow, water damage, and electrical damage.

Do I Need Hazard Insurance?

Not everyone is required to have homeowners insurance to cover their properties against damages from unforeseen hazards. But lending institutions usually require a homebuyer to take out an insurance policy that covers necessary hazards.

This requirement protects the lender who has secured the mortgage against the value of the purchase property. So, the bank or lending institution wants to make sure the value of the house or condo remains after damage from an event such as a fire.

Because lending institutions want to make sure the value of the property isn’t reduced due to an unforeseen hazardous event, it is not uncommon for them to require buyers to pay their first year of insurance premiums up front.

How Much Does Hazard Insurance Cost?

What you will pay for your home insurance policy with hazard insurance depends on a number of factors. These can include the value of your property, what’s covered by the policy and what you decide is the best deductible for you.

Home insurance costs are generally based on the qualities of your new home, including the type of structure it is, its age, and its security features. The location of the home is also considered.

For example, if you live close to a fire or police station, your policy may cost less. On the other hand, if your property is in a high-crime neighborhood with frequent burglaries, then your insurance policy would cost more.

Your credit history and number of previous insurance claims can also factor into the final cost of the insurance.

How Can I Find Out More About What Insurance is Right for Me?

The different type of home insurance policies and understanding the complexities of hazard insurance can be difficult. But it’s one of the most important things you can do to protect your property and financial investment.

A trusted Clever Partner Agent can make the process much easier and unravel its complexities, saving you money and giving you the ease of mind knowing that your property is protected against unforeseen events.



Thomas O'Shaughnessy
Thomas O'Shaughnessy

Tommy O'Shaughnessy is the Head of Research at Clever Real Estate, the free online service that connects you with top local agents to save on commission. Tommy's team of data scientists create surveys, gather data, and analyze trends in housing, real estate, and personal finance. He directs public relations efforts, acting as a "data communicator" between his team and the press. Clever studies have been featured in Politico, the LA Times, CNBC, Forbes, Yahoo Finance, and other publications.

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