The house where one resides and calls home is the most important asset; a few more fortunate people may have more than one home where they reside. In most cases, the purchase of a home is an investment, the homeowner will purchase insurance to protect the home against covered perils.
Hazard Insurance simply means security against peril; the term is mainly used by mortgage companies who require encumbered properties to be covered by at least a basic fire insurance policy. Since the term is mostly utilized by the real estate industry, the requirement for insurance is very basic and only pertains to the dwelling (building) which is used to collateralize a real estate loan (mortgage).
The most basic form of hazard insurance is a Basic Fire Insurance Policy; in many States, this very simple form covers a property from the perils of Fire & Lightning. 99.99% of homeowners would not be satisfied by this coverage alone although it may satisfy the mortgage lender.
There are many types of property insurance which all may be referred to as Hazard Insurance; some examples are as follows: Homeowners Insurance, Home Insurance, Landlords Insurance, Dwelling Fire Insurance, Townhome/Condo Insurance, Fire Insurance etc…
The simplest way to assist home buyers is to explain that there are two types of Hazard Insurance which is a ‘must buy’; one type is a Homeowners Policy primarily offering comprehensive coverage for an owner occupied property, and the second type is a Landlords Policy offering fire and liability coverage for a tenant occupied property. It is important to note that the definitions within each individual insurance policy state the meanings of the words used in the terms and conditions of the policy; if the incorrect policy form is utilized by the home owner, there is a great chance that a claim would be denied by the insurance carrier based on the fact that the use of the property was misrepresented by the insured.
It is important for a customer to ask his/her insurance company to explain the coverage in detail and make sure that all aspects of the property, attached and detached structures, personal property (personal belongings), loss of use, personal liability, medical payments and scheduled or unscheduled floaters are all explained. Today, it is common for a customer to simply compare the premium from one carrier to another without even viewing the limits of coverage or in some cases, without care of what is or what is not covered; although the aforementioned is more prevalent in areas of depressed real estate values, the Internet has provided a medium for customers to simply shop price and quickly switch from one carrier to another as if the carrier will be punished and the customer will save a small amount of premium without caution to the level of coverage purchased.
Insurance premium is calculated by actuarial firms and insurance carrier employed actuaries based on their research of the risk to be insured. Carriers utilize an industry standard to calculate the retail reconstruction cost of the dwelling to be insured; the dwelling limit, age of the home, proximity to hazard, prior claims experience, deductible and customer’s credit rating (in most States except California) and many other factors are utilized to assess the risk factor and thereby generating a published premium for the policy.
Since the general public does not often have regular dealings with home insurance, it is important to truly investigate one’s coverage and take caution when securing coverage. Although one may think that he or she is unlikely to be a victim of a covered peril, in the event of claim, the insurance carrier will interpret the policy coverage as secured by the insured to adjust a claim.
It is suggested that no less than 1 hour should be spent on reviewing coverage at least once every three years; the 1 hour doesn’t include shopping for price. If a customer doesn’t wish to speak with an agent, the customer may contact the current insurance carrier and request the Customer Services representative take the time to answer any questions regarding the policy. For those that take this topic lightly, we couldn’t think of anyone that would want to be faced by a devastating occurrence that may go uncovered for which a few minutes of counsel may have changed the course when securing coverage.