Disclaimer: Informational statements regarding insurance coverage are for general description purposes only. These statements do not amend, modify or supplement any insurance policy. This website does not make any representations that coverage does or does not exist for any particular claim or loss, or type of claim or loss, under any policy. Whether coverage exists or does not exist for any particular claim or loss under any policy depends on the facts and circumstances involved in the claim or loss and all applicable policy wording.
Hazard insurance is the part of your homeowner’s policy that is set up to cover damage to your house caused by fire, water, or natural disaster. The parts of your property that are listed on the policy, the house and possibly a detached garage or other structure, are straightforward. The confusing part of hazard insurance is knowing what catastrophic events will trigger a viable claim.
Natural disasters can include severe weather events like hurricanes and earthquakes, but these types of storms may not be covered on your homeowners’ policy. Only events listed explicitly in your hazard policy will be considered for coverage, so you want to review that section and assess what might be applicable in your area.
What about flood insurance?
Flood insurance is a special kind of hazard insurance policy that is not automatically included in your homeowners’ policy. Flood insurance is regulated by the federal government and only offered through the National Flood Insurance Program (NFIP) in conjunction with Federal Emergency Management Agency (FEMA) designated floodplain information. NFIP was established in the 1960s when widespread flooding on the Mississippi River made private flood insurance impossible to buy.
Mortgage lenders may require property owners to carry flood insurance if they are in a FEMA-designated flood zone. Properties in flood zones A or V have the highest risk of flooding. If your house is in zones B, C or X, the risk is lower. Only flood insurance will cover the cost of damages from a flood created by severe weather conditions or an infrastructure emergency like a ruptured water main or broken dam.
What other hazards can damage my house?
Sitting in your kitchen on a warm sunny day it is hard to imagine all the possible hazards your property could face. In the North Country, the first problems that come to mind are from severe winter weather. Snow and ice build-up can cause roof damage or force water behind your siding and into the walls. Plumbing could freeze in extreme cold and broken pipes could flood your basement.
Even in summer weather, your house is not immune to damage. Hot, dry summer days can cause grassfires that move quickly to your house. Trees could fall on your garage from strong winds or lightning storms, or your air conditioning unit could short out and cause a fire. The right hazard insurance coverage could repair or replace your house if it is damaged.
How does hazard insurance work?
The terms of your hazard insurance policy will dictate how much it pays out in the event of a claim. There are three types of coverage — actual cash value, replacement cost value, and extended replacement cost — each with its own premium rates.
Actual cash value will pay you the cash value of the item that was damaged. For example, if the carpet in your bedroom was damaged, you should expect to receive a payment for the value of the old carpet. This may not be enough to cover the cost of new carpet, however.
To get the cost of the new carpet covered, you would need a policy that stipulates replacement cost value. Replacement cost does not take depreciation into consideration, but it may not cover the total cost of the carpet replacement if something else comes up during the project.
While you are having your carpet replaced, you may discover some damage to the subfloor. In this instance, you would need an extended replacement cost policy to avoid having to pay for anything out of your pocket.
The cost of your insurance premiums will reflect the level of coverage you choose. Hazard insurance can be complicated and should be evaluated by a knowledgeable insurance agent to determine how much and what type of coverage is available for you. For more information on hazard insurance, contact us today!