Unless you have infinite funds at your disposal the chances are you’d be hit hard if you needed to finance the rebuilding of your home! And as we all know depending on what state you reside in, natural disasters do strike from time to time in the States. A Hazard insurance policy can safeguard you against such disasters including fires, tornado damage or flooding. But this priceless type of insurance can also become complicated if not explained properly
Explain More to Me
This type of insurance policy can cover all sorts of things from earthquakes to vandalism, wind damage to fire. In California you can even purchase a policy to cover only earthquakes. So you can check as to what specifics you can cover under Hazard Insurance. This policy can also go together with your homeowners insurance to give you complete all round cover if you so wish. In fact, taking both of these as one unit is certainly advisable. You need however to ensure the policies aren’t covering the same things. So carry out a thorough check before putting a signature to the contract.
What Else Do I Need to Know?
If a building or dam is vandalized in the building process these may not be covered under some insurance policies. Policies covering huge damage naturally will carry a higher premium. Comprehensive insurance policies will take under their wing physical damage and the resulting liabilities. You should remember Hazard Insurance only takes care of actual physical property damage!
How Do They Calculate it?
This depends on the age of the property, its appraisal value and any possible natural hazards. Your mortgage lender or insurance provider will explain this further.
How Does This Effect Purchasing a Mortgage?
The overall function of Hazard Insurance for lenders is to completely safeguard their investment. Almost all lenders will insist you get the very smallest level of Hazard insurance before you take out the mortgage itself.
It’s a fact most people take out homeowners insurance as well simply to get liability protection, though the former’s coverage could change to property insurance according to the terms included. Make sure you double check everything. Hazard Insurance will give you just enough cover to rebuild the property should the worst actually happen.
Can You Clarify Hazard and Homeowners Insurance
Just to be clear Hazard insurance safeguards you financially from both theft and damage. It’s usually bought anyway as part of your Homeowners Insurance Policy. But Homeowners Insurance has liability insurance built in used to pay things like legal costs or medical bills for someone injured on your property.
What About the Different Types Available
Well it’s true there are various types of Hazard Insurance to cover various levels of help needed in rebuilding or repairing. Guaranteed or extended replacement cost will finance a house rebuild even if it goes over the limit of your policy. A replacement –value policy gives you enough cash to be able to purchase a new item. Cash value policies pay what it originally cost you to purchase something.
How Much Coverage I will Need?
The rule of thumb is the more expensive the house – the more insurance you’ll need. Liability insurance isn’t compromised by house size however. Most experts believe $330,000 worth of liability coverage should be more than enough to meet your needs.
Important Things to Note!
All of these things will take on varying degrees of importance according to where you live. IF you face a greater risk of things like earthquake tremors or serious flooding then you’ll have to take out separate policies to cover these. Your Homeowners Insurance won’t be enough to deal with this. Also remember if you have unusual and valuable possessions like pieces of art or other collectibles you’ll be advised to take out what they call ‘A floater’ to cover them. This is because Hazard Insurance limits the coverage on such valuables.
As with most things of this type you should endeavour to get the very best advice. It’s always best to follow the trends resulting from recent disasters or acts of God in other states. The best mortgage lenders and insurance providers will go out of their way to ensure you understand everything clearly.