To truly understand what hazard insurance is, let’s first look at what a hazard is a little closer.
Hazard; a source of danger (webster). Hazard and peril are often used when speaking about insurance. Peril is something that causes or can cause loss. Whereas a hazard is something that makes a loss more likely.
A few common types of perils covered by hazard insurance:
- Hurricane
- Tornado
- Hail
- Flood
- Smoke
A hazard essentially is something that increases the chances of loss. Hazards are classified as 1 of 4 categories;
- Physical hazards
- Legal hazards
- Moral hazards
- Morale hazards
A physical hazard is a hazard that increase the chance of loss due to physical issues or conditions and inadequacies in the structure or operation of an insured property. As an example a house is covered in ice from the cold weather might be considered a physical hazard in a homeowners insurance policy. And at the same time a health insurance policy may consider a pre existing condition that’s at risk due to the ice to be a physical hazard within that policy.
A legal hazard creates an increase in the chance of loss due to an imposed condition by the legal process that makes an insurer cover a risk that would otherwise deem uninsurable. As an example, anything that could potentially spark a lawsuit involving an insurer can be considered a legal hazard.
Moral hazards are pretty self explanatory. Potential loss from fraudulent acts by the insured are considered moral hazards. Moral hazards include filing false claims, and misrepresentation on a policy to gain favorable conditions.
A morale hazard has to do with an insured persons attitude towards his belongings. It comes up when a person doesn’t care about their possessions because they know they’re insured.
What is hazard insurance on a home?
Hazard insurance protects the properties owner against any damage or loss caused by fires, storms, and other natural occurrences. Hazard insurance is usually part of a general homeowners insurance policy that protects the structure of the home.
What is the difference between hazard insurance and homeowners insurance?
Hazard insurance will protect you as the homeowner, against damage caused by natural events. Homeowners insurance is financial protection in the event of theft or damage to your house or possessions.
If you have additional questions regarding hazard insurance please feel free to drop one of our wonderful agents a message. We’d love to hear from you.
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