Hazard Insurance
Insurance coverage that protects property owners against damage from specific hazards or perils such as fire, windstorms, hail, or vandalism. It's typically a component of homeowners insurance and is often required by mortgage lenders.
Example
“The mortgage lender required hazard insurance covering fire, wind, and hail damage before approving the home loan.”
Memory Tip
Think 'HAZARD = Home And Zone Against Risk Damage' - it protects your property from specific dangers.
Why It Matters
This coverage protects your most valuable asset from costly damage and is legally required by most mortgage lenders. Without it, you could lose your home financing and face catastrophic financial losses from property damage.
Common Misconception
Many believe hazard insurance is separate from homeowners insurance, but it's actually a component within most homeowners policies. Some also think it covers all possible risks, when it typically only covers specifically named perils listed in the policy.
In Practice
Lisa buys a $300,000 home with a $240,000 mortgage. Her lender requires hazard insurance equal to the loan amount. Her homeowners policy includes $300,000 in hazard insurance covering fire, lightning, windstorm, and other named perils. When a kitchen fire causes $50,000 in damage, the hazard insurance portion of her policy covers the repairs after her $1,000 deductible, protecting both her investment and the lender's interest.
Etymology
The term evolved from 'hazard' meaning risk or danger, combined with insurance principles developed in the 17th century London markets to protect against specific property risks like fire and marine perils.
Common Misspellings
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See Also
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