If you’re purchasing a home, your lender will probably ask you to purchase hazard insurance. Hazard insurance typically refers to coverage for the structure of your home in the event of a fire, lighting, vandalism, windstorm, and hail but hazard insurance is not the same as homeowners insurance.
Hazard Insurance vs. Homeowners Insurance
When it’s time to purchase your policy, should you purchase hazard insurance or homeowners insurance? The answer is typically to purchase homeowners insurance and here’s why…
Hazard insurance provides a very basic level of coverage and it only covers the structure of your home. This is fine with the mortgage lender because they’re only concerned with the structure of your home, but it’s probably not fine with you because you have personal property, furnishings, and other items of value inside your home. For example, if you had a house fire, hazard insurance would help pay for the damage to your house, but it wouldn’t help pay for anything that you kept inside your house, such as furniture, electronics, clothing, etc. It also wouldn’t pay for your additional living expenses, such as renting another house or apartment while your home is being repaired.
Homeowners insurance, on the other hand, provides a much more comprehensive level of coverage. In addition to covering the same things hazard insurance covers, homeowners insurance provides coverage for your personal property (contents of your home), additional living expenses, and liability insurance if you’re sued. Homeowners insurance includes a basket of coverage options that a typical homeowner might need, and it’s packaged together in one convenient policy.
What’s not covered by homeowners insurance?
Even though homeowners insurance policies provide coverage for a lot of things, there are a variety of things that are typically not covered. When you’re trying to find out if something is covered by homeowners insurance, you first need to determine the reason why the damage occurred. Homeowners insurance typically provides coverage for events which are sudden and accidental in nature. For example, if a pipe bursts, that would be considered sudden and accidental and would most likely be covered. But, if you have a leaky pipe which has been leaking for years and causing wood rot, that’s typically not going to be covered because, even though it might be accidental, it’s not sudden. In addition to determining if something was sudden and accidental, there is a list of exclusions in your Homeowners policy that you’ll need to be aware of.
Your insurance agent is there to help
It’s always recommended to purchase your insurance from a licensed insurance agent who can help you make the right decisions and explain your options to you. Plus, they can help you navigate the claim process, which will make it much easier for you. In most cases, your insurance agent is paid by the insurance company, and it doesn’t cost you any more to have an agent than it would if you purchased your policy directly from the insurance company.
We have a great team of highly experienced licensed insurance agents here at The Lofrumento Agency who are excited to help you. Please call 518-278-2999 or send us a message today to get a quote for or ask questions about homeowners insurance or any other type of insurance.
John Lofrumento, CFP®, FSCP®, RICP®
President, The Lofrumento Agency
Clifton Park, NY / Ballston Lake, NY