What Is Hazard Insurance? A Homeowner's Guide to Hazard Insurance

If you're planning to buy a home in the near future, you'll need to secure an insurance policy. Most mortgage lenders require insurance. Otherwise, they'll reject your applications. There are different forms of insurance, however, including hazard. What is hazard insurance exactly, and does it offer a sufficient amount of protection?

Overview of Hazard Insurance

Hazard insurance is designed to protect against financial losses associated with natural disaster- or hazard-related damage to a home. Maybe a fire breaks out, or perhaps your home is struck by lightning. Natural disasters and hazards such as this are covered with hazard insurance. Assuming you have hazard insurance, the insurance provider will compensate you for the cost of the damages.

With hazard insurance, you may receive financial protection for the following types of natural disasters and hazards:

• Fires
• Hail 
• Wind 
• Lightning
• Snowstorms
• Fallen trees and limbs

It's important to note that most hazard insurance doesn't cover flood damage. For flood damage, you'll need a separate flood insurance policy.

Hazard Insurance vs Homeowner's Insurance

Some people assume that hazard insurance is the same as homeowner's insurance. While they are both designed for homeowners, though, they aren't the same.

Homeowner's insurance is a broader form of insurance. It offers financial protection against both property damage as well as bodily injury. If someone is injured while visiting your home, for instance, homeowner's insurance will protect you from any liability claims. Hazard insurance, on the other hand, only offers financial protection against property damage.

Homeowner's insurance typically doesn't cover natural disaster- and hazard-related damage. Rather, that's where hazard insurance comes into play. You'll still need homeowner's insurance, but you may want to get a hazard insurance policy as well. Hazard insurance is a separate form of insurance that, as the name suggests, offers financial protection against natural disasters and hazards.

Hazard Insurance Requirements

You might be wondering whether or not hazard insurance is required. While different mortgage lenders have different requirements, many of them require both homeowner's insurance and hazard insurance. Without hazard insurance, they'll reject your application, meaning you won't qualify for a mortgage loan.

If you purchase your home outright by paying for it in full, though, you typically won't need hazard insurance. Hazard insurance, as well as homeowner's insurance, offer usually only required when financing a home with a mortgage. If you pay for your home without a mortgage loan, you typically won't be required to obtain insurance for it.