When acquiring a mortgage and buying a house, the lenders are right to ask for some basic insurance from you. Usually, this is basic homeowners insurance that covers a variety of things. What you might hear that seems strange, however, is that they also request that you have hazard insurance. This may sound different than homeowners insurance, but they're actually under the same policy. When a lender asks that of you, they make it sound like a new policy plan entirely. Still, under most insurers, it's merely an extension of your homeowner's insurance. Hazard insurance versus homeowners insurance isn't a thing—it's more like additional coverage you can get to make yourself safe from certain situations or different kinds of damage. Other plans will cover different types of things. It's essential to examine the coverage that you'll be getting under your policy.
What Hazard Insurance Covers
Most homeowners insurance plans cover a few basic things, like fire, lightning, hail, windstorms, hurricanes, and other extreme weather events are always protected. Sometimes stuff like earthquake or flood coverage is extra and has to be added onto the policy and does not come with the most basic packages. These policy packages are designed to protect and ensure the home with enough money to be rebuilt in the situation that these events happen. Other problems are listed under a lot of hazard insurance, like theft, break-ins, or vandalism. Note that there's a significant difference: named perils are directed and specific, while open perils cover everything except what's listed. In that way, the open perils policy is right for broader coverage. Still, if your area has a few specific issues, it might be better if you make sure to get them on your policy.
Is Hazard Insurance Worth It?
To put it simply, of course! Think about how much money is put into a house—hundreds of thousands of dollars—and not only that but also all of your property and your belongings that you store inside it, which is usually in the tens-of-thousands-of-dollars range. Because of this, there's no reason not to be insured and protected against at least the most fundamental risks. But it's also a good idea to have coverage beyond basic. You don't want your plan only to cover your home and not all of the appliances and belongings inside of it, after all. When thinking about getting hazard insurance versus homeowners insurance, think about which policies you need and what you feel your home is most at risk for, and make sure to guard against those things.
Supplemental Coverage by Necessity
Besides the basic coverage, it's essential to guard yourself against other issues that your area may have, but your basic insurance doesn't cover. For example, if your site has a lot of theft and vandalism, even if your policy doesn't cover that, it makes sense to have it. The same goes for earthquake and flood insurance, which can happen to many homes but isn't always covered under everyone's plan. Think about what's the most significant danger to your house, and make sure that it's covered under your insurance plan. If you pay $5 a month extra for a part of your list, and then in five years, you get paid out $10,000, you'll be happy. And the slight increase for specific additions to your plan is worth the security and peace of mind. You won't regret it.