What’s The Difference Between Homeowners and Hazard Insurance

    What’s The Difference Between Homeowners and Hazard Insurance

    Home Buying

    November 14 2018

    In today’s post we are going to talk about homeowners insurance and hazard insurance, and why it is so important in order to protect property owners against the possibility of any possible thefts or damages from fires or any unfortunate natural events earthquakes, storms…

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    When someone applies for a mortgage, it is requested to give proof of insurance in the property so that the bank can issue the mortgage. When it comes to home insurances, homeowners can get either take a look at all the options and pick one that suits best their needs, or leave it in the hands of their banks, which will add an extra cost to the mortgage given.

    What does a homeowners insurance cover?  Interior damage, exterior damage, loss or damage of personal assets/belongings, and injuries that may arise while on the property. However, it’s important to remember when a claim is made by the homeowner, he/she will have to pay a deductible, which will be calculated based on the type of insurance policy, excess costs..etc

    What is key here is to keep in mind is that the higher the deductible is on an insurance contract, the lower the monthly or annual premium on a homeowners insurance policy will be.

    But of course, there is a liability limit, that usually stands at around $100,000, but it can go higher depending on the policyholder. What the liability limit does, is to estimate the percentage of the coverage that would go toward replacing or repairing damage to the property structures, personal belongings, and costs to live somewhere else while the property is worked on.

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    The reason why at Sean La Rue Home Loans we think it’s a must to get hazard insurance when you acquire a property is because your average home insurance won’t usually  cover all sort of damages that your place could suffer. Acts of war or acts of God will usually not be covered in a homeowners insurance policy. Its actually a common requirement from a lender to ask to have a minimal hazard insurance when applying for a mortgage, to protect the investment and value of the new home.

    Think about it this way: it’s much easier to deal with the cost from hazard insurance than having to pay off all the costs generated from an unfortunate event that may happen to your property. Better to be cautious than taking risks with this kind of stuff, specially when living in high-risk areas. Whenever you buy a home, you are making an investment. You are investing so much out of your pocket every month in that investment, so why not spending a couple hundred more per year to insure it?

    How much hazard insurance do I need for my home?

    We’ll know how to estimate how much hazard insurance is actually needed for our particular case based on how much cost would we have in the worst case scenario(event of a total loss).  This amount may change from one year to another, and could be significantly different from the property’s value, that’s why policies are usually written for one year and renewable. It’s very common that lenders include the costs of hazard insurance in the monthly mortgage payment.

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    And that’s all for today’s post, hope you found it useful and don’t hesitate in reaching me out if you have any questions or you are interested in making a consultation.

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