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<p>While hazard insurance only protects the structure of your home from damaging events like windstorms and fires, a homeowners insurance policy provides coverage for personal property, loss of use, liability, and medical payments to others.</p>
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<h2 class="wp-block-heading" id="ryrSoz">Hazard Insurance vs. Homeowners Insurance</h2>
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<p>Keep reading to learn about the differences between hazard insurance and homeowners insurance and which policy is best for you.</p>
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<h3 class="wp-block-heading" id="6cIaiY">What Is Homeowners Insurance?</h3>
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<p>Homeowners insurance is a type of insurance policy that protects your home from damaging events like fire and vandalism. If you don’t have an emergency budget to cover damages from these events, you can pay a monthly or annual premium to have an insurance provider cover those costs for you.</p>
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<h4 class="wp-block-heading" id="T4zKuL">Types of Homeowners Insurance Coverage</h4>
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<p>Most homeowners insurance policies come with six areas of coverage:</p>
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<li><strong>Dwelling</strong>—Dwelling coverage covers the cost of rebuilding your home if it’s damaged in an accident. This coverage protects all of the built-in elements of your home like the cabinetry, flooring, and walls. To determine how much protection you’ll need to cover the complete cost of rebuilding your home, you can use the estimate from your insurance company, talk to a local real estate appraiser, or purchase $100 to $155 of protection per square foot.</li>
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<li><strong>Other structures</strong>—This type of coverage protects the physical structures on your property that are detached from your home, like a garage, shed or fence. Other structures coverage is usually 10% of dwelling coverage.</li>
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<li><strong>Personal property</strong>—This protects your belongings in your home and when you’re on a trip. If your belongings are damaged, your policy will pay to replace them. Most policies start as actual cash value (ACV), which means your provider will only give you enough money to replace your items with ones of depreciated value. However, you can purchase a replacement-cost endorsement that will replace your damaged items with new items. Your property coverage is usually 50% of dwelling coverage.</li>
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<li><strong>Loss of use/additional living expenses</strong>—If an event damages your home and you can’t live there during repairs, your policy will pay for living expenses while you live in a hotel or temporary rental. This may include the cost of eating out for every meal, the cost of doing laundry, or the cost of your hotel room. This is usually 20% of dwelling coverage.</li>
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<li><strong>Liability</strong>—This protects you when you’re responsible for causing bodily injury or property damage to another person. The policy will cover medical bills, repair or replacement costs, and legal fees. We recommend purchasing enough coverage to protect all of your assets inside and outside of your home, as these items could be used as collateral if you’re sued. This is usually at least $300,000 for homeowners.</li>
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<li><strong>Medical payments to others</strong>—If a guest is injured on your property, your policy will pay for their medical bills. Most policies offer $1,000 to $5,000 of protection per person.</li>
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<p>Insurance companies also offer endorsements that you can add to your policy for extra protection. These endorsements vary by company, but common ones include coverage for identity theft, earthquakes, valuable personal property, personal property replacement costs, and water backup.</p>
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<h3 class="wp-block-heading" id="7NnEBO">What Is Hazard Insurance?</h3>
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<p>Hazard insurance isn’t a separate policy from homeowners insurance; it’s just the structural part of the home insurance policy that includes dwelling and other structures coverage. In general, hazard insurance covers damage caused by fires, severe storms, hail, sleet, and other natural events. It’s different from catastrophe insurance, which is a separate, freestanding policy that covers specific types of disasters.</p>
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<p>Hazard coverage comes in two forms—named-peril and open-peril.</p>
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<h4 class="wp-block-heading" id="GFOvMt">Named-Peril Policy</h4>
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<p>Named-peril policies only offer protection from the hazards listed as covered. A common named-peril policy is an HO-2 policy, which offers coverage for the following 16 events:</p>
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<li>Frozen plumbing</li>
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<li>Sudden and accidental tearing apart, cracking, burning, or bulging</li>
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<li>Volcanic eruption</li>
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<li>Sudden and accidental damage from an artificially generated electrical current</li>
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<li>Fire and lightning</li>
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<li>Windstorm and hail</li>
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<li>Accidental discharge or overflow of water or steam</li>
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<li>Weight of snow, sleet, or ice</li>
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<li>Explosion</li>
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<li>Riot or civil commotion</li>
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<li>Falling objects</li>
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<li>Vandalism</li>
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<li>Theft</li>
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<li>Smoke</li>
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<li>Aircrafts</li>
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<li>Vehicles</li>
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<h4 class="wp-block-heading" id="TSjKG2">Open-Peril Policy</h4>
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<p>Open-peril policies cover all events, except the ones listed as exclusions. An example of this type of policy would be an HO-3 policy, which is what most insurance companies use for single-family homes. These are the common exclusions listed under an open-peril policy:</p>
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<li>Neglect</li>
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<li>Power failure</li>
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<li>Ordinance or law</li>
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<li>War</li>
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<li>Nuclear hazard</li>
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<li>Water damage from flooding</li>
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<li>Earth movements like landslides, earthquakes, subsidence, mudslides, and sinkholes</li>
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<li>Mold, fungus, or wet rot, unless it’s hidden within the walls, ceilings, or floors and is a result of plumbing failure</li>
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<li>Intentional loss</li>
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<li>Governmental action</li>
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<li>Mischievous acts</li>
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<li>Birds, vermin, rodents, or insects</li>
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<p>Note: While an HO-3 policy isn’t named-peril, it usually protects against the same 16 events listed under an HO-2 policy.</p>
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<h2 class="wp-block-heading" id="11rOM3">Is Hazard Insurance Required?</h2>
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<p>Hazard insurance is not required by law. However, the lender who gave you the loan to buy your home almost always requires hazard insurance. This is because the structure of your home acts as collateral for the loan. If you fail to pay your mortgage, the bank could take your home and resell it.</p>
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<p>Keep in mind that it’s only the structure of the house that the mortgage lender cares about, which means their insurance requirements are usually only for dwelling and other structures coverage. It’s up to you to decide if you want more protection in the form of personal property, loss of use, liability, and medical payments coverage.</p>
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<h2 class="wp-block-heading" id="HHfovb">Hazard Insurance vs. Homeowners Insurance: Cost</h2>
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<p>The national average cost for homeowners insurance in 2017 was about $101 per month, according to the Insurance Information Institute. Because hazard insurance is typically included in homeowners insurance, it doesn’t have a specific cost.</p>
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<p>Your insurance premium may be higher or lower depending on the following factors:</p>
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<li>Claims history</li>
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<li>Credit score</li>
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<li>Marital status</li>
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<li>Number and types of pets</li>
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<li>Cost of living</li>
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<li>Your home is in a high-risk area</li>
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<li>Susceptibility to natural disasters</li>
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<li>Rebuilding cost of your home</li>
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<li>Proximity to a fire station and fire hydrant</li>
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<li>Condition of your home</li>
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<li>Age of your home</li>
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<li>Square footage of your home</li>
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<h2 class="wp-block-heading" id="1ySUXV">Our Conclusion</h2>
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<p>When deciding between hazard insurance and homeowners insurance, we recommend purchasing a comprehensive homeowners insurance policy with personal property, loss of use, liability, and medical payments to others protection, in addition to the dwelling and other structures coverage.</p>
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<p></p>
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<p>To read the full article, <a href="https://www.thisoldhouse.com/home-finances/reviews/hazard-insurance-vs-homeowners-insurance">click here.</a></p>
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