What is hazard insurance coverage and when is it required?


Hazard insurance coverage is insurance to cover for damages caused by fire, vandalism or natural disaster - flood, earthquake, and storms. It can also be called homeowners' or property insurance. Natural disaster events are often excluded from a common insurance policy and coverage for them is sometimes required to add separately.

Often properties in high-risk areas will have events specifically excluded from a typical homeowners' or property insurance. For example, in a flood-prone area flood insurance will be offered separately to you.

Generally, the owner chooses a comprehensive insurance policy first - it will cover most common hazards and sometimes additional hazard coverage is not necessary. However, sometimes certain hazards are not covered .

When closing on a sale, the borrower is asked to get some hazard insurance and is often asked to pay one year's hazard / homeowner's insurance premiums. Borrowers are strongly encouraged to get as much insurance as to cover mortgage amount at the least. Hazard insurance premiums are calculated depending on property age, appraised value, construction details, and existing hazards in the area. A buyer will have to weigh what to include in the hazard coverage and what to leave out in order to save on monthly payment. Sometimes a specific hazard does not need to be insured against separately, as it is covered by the comprehensive policy.

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