Table of Contents
- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
About Hazard Insurance
When you are applying for a mortgage or refinancing your current one, there are a lot of documents that are required by the lender to process your loan.
One of the most commonly asked documents by lenders is hazard insurance. In this post, we will learn what is hazard insurance in detail.
What Is Hazard Insurance?
Hazard Insurance is not a word used in insurance contracts. There is no way to find out why do the banks refer to it as hazard insurance being that the standard insurance contracts don’t mention the word hazard.
Hazard insurance in the mortgage is insurance that provides physical damage coverage to tangible property that they are using as collateral for the loan.
The largest investment that an individual will ever make is to buy a house. The hazard insurance protects the homeowner’s biggest investment against any possible financial disaster from the loss of the home.
More About Hazard Insurance
Hazard insurance protects the loss of the property from fire damage, but it also protects against Slip and fall accidents, weather damage, burglary, dog bites, and many other potential liabilities.
If there is no hazard insurance and if any of these events occur, the person would lose his biggest investment and have to find other options for residing.
The hazard insurance protects the structure of the property and your personal property but only up to a certain point.
If the homeowner owns unusually high-value items, the homeowner must pay an additional cost to add a rider to the insurance policy to provide extra insurance coverage.
Depending on where you live and your needs, hazard insurance may or may not include all the coverage that you need.
Almost all insurance companies hide behind the term “Act of God” and use that term for the damages that they don’t want to cover.
What Is Not Covered In Hazard Insurance?
Some of the coverage that insurance companies don’t typically cover are Earthquakes, Floods, Landslides, damages caused by social unrest.
If the coverage is even available, the homeowner would be required to pay for the additional coverage or obtain a separate policy. Having hazard insurance is paramount to all homeowners to protect their investment.
Why is Hazard Insurance Important for Lenders?
Lenders also need hazard insurance to protect the security of their loans.
There is an old saying in the real estate world “The land doesn’t burn.”
However, if the structure on the land burns to the ground, and all left is the concrete foundation, it may be possible that the lender’s loan exceeds the value of the land and the lender could end up losing money.
Whether you are a lender or a homeowner, it is important for you to check with the insurance agent or directly with the insurance company to confirm that there is adequate insurance coverage to protect the interest of homeowners and lenders.
What Is Covered In Mortgage Hazard Insurance?
Following are the things that are covered under standard hazard insurance:
- Windstorm and hail
- Fire and lightning
- Volcanic emission
- Smoke
- Blast
- Riots
- Falling articles
- Weight of ice and snow
- Vandalism
- Vehicles
- Airplane
- Robbery
- Heating of AC units or electric current.
Conclusion
Hazard insurance is one of the most important parts of your homeownership. Hazard insurance is part of your homeowners’ insurance which is significant for bout you and your lender.
The cost of hazard insurance depends on the location that you living in. Many factors are considered before hazard insurance is obtained.
To get more information you can speak to your trusted insurance agent so that you can get appropriate coverage for your home.
