What is Hazard Insurance?
Let me guess, you are in the process of buying a home or in the middle of a refinance, and your mortgage company or bank asks you to show proof of hazard insurance.
The reason that statement is most likely correct is, banks and financial institutions are the only people who refer to homeowner’s insurance as hazard insurance.
Why is that?
Hazard insurance generally refers to structure itself, covering the building from fire, wind, water damage, or other “hazards”. The reason the bank only cares about that is that the property itself is what they are worried about.
The bank isn’t worried about your personal stuff inside, or the liability protection you get in the case someone gets hurt.
What is the difference between home insurance and hazard insurance?
The only real difference between the two is the terminology. You can’t purchase a “hazard” insurance policy directly from an insurance company.
The only time we see a hazard insurance policy is when the bank force places coverage on your home. The bank takes a hazard insurance policy out, covering the building structure for the amount of your loan balance.
That policy does not give you contents coverage, liability coverage, or any other protection that a typical homeowner’s insurance policy will.
What do I show the bank?
The good news is when your bank asks you for proof of hazard insurance it really does mean proof of homeowner’s insurance.
You can have your insurance agent type a binder or send a declaration page showing the coverage you currently have or you are buying for your new house.
Homeowner’s insurance can be difficult to navigate through especially when you are in the process of buying a new home.
The biggest advice I can give is to use an independent insurance agent who can help walk you through the process, give you multiple options at once, and make sure that the biggest investment you will probably make, is covered correctly.
If you do not know an independent insurance agent, click the button below to get in contact with one of our trusted agents.
Click here to read more about what homeowner’s insurance costs, how it is calculated, and what some of the major factors are that go into the rating.