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Why Hazard Coverage is an Important Part of Your Homeowners Insurance Policy

Is "hazard insurance" the same as "homeowners- insurance?" Sometimes the terms might be used interchangeably, but there are some key differences.

Homeowners insurance is a type of insurance that covers your private residence. Hazard coverage is a component of a standard homeowners insurance policy, just like collision coverage is a component of auto insurance. Hazard insurance covers your home and personal property in the event you suffer a loss caused by a specific hazard or peril, such as fire or theft. Other components of a homeowners policy that are separate from hazard insurance include coverage for liability, loss-of-use and medical payments to others.

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Hazard Insurance: What Does it Cover?

You may hear the term "hazard insurance" in conjunction with purchasing a home or taking out a mortgage. That's because a mortgage company requires new homeowners to purchase hazard coverage to protect their house — and their investment — against potential perils. Hazard coverage may cover your primary dwelling, additional structures on your property (like a shed or detached garage) and personal property.

There are two types of hazard coverage options for homeowners insurance. A "named peril policy" provides coverage for specific perils listed in that policy, such as fire, hail storms, lightning and theft.

An "open peril policy" is the opposite approach. This type of policy provides coverage against all perils except those specifically listed on your policy. Examples of perils listed on an open peril policy include nuclear hazards and war.

Depending on where you live, you may need additional insurance to protect your home, such as flood, windstorm and hail insurance, that is not included in your hazard coverage.

Homeowners Insurance: What Does a Policy Include in Addition to Hazard Coverage?

In addition to hazard coverage, homeowners insurance includes provisions for liability, loss-of-use and medical payments to others. For example, if a guest were to be injured in your home and successfully sue you for negligence, the liability coverage in your homeowners policy could help cover the cost of this judgment. The medical payments portion of your policy would cover this injured guest's medical expenses. If your home were to be damaged by fire and you are forced to relocate, the "loss-of-use" component of your homeowners policy could provide coverage for expenses associated with this relocation.

Choosing the Right Insurance Coverage

Talk to an independent insurance agent to learn what coverage options are available and understand which options are right for your needs.

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