What You Need to Know About Hazard Insurance

How do you choose which homeowner’s policy to buy? There are several levels of protection that cover the structures on your property as well as personal possessions. One of the key distinctions is how the policy defines what’s covered. Named perils coverage is specific to certain catastrophic events. Open perils coverage addresses most events except those excluded by the policy.

Ninety percent of homeowners choose the HO-3 policy, which covers damage to both your home and its contents at current replacement value, up to the policy’s limits. It also provides liability coverage if someone is injured on your property, as well as medical payments and additional living expenses if you’re displaced during repairs.

Earthquake and flood damage are not typically included, but can be added through special riders. You may also need additional coverage for high-value items like fine art or jewelry. Be sure to photograph each room and its contents, and store that documentation in a secure place, such as a safe deposit box.

Your monthly mortgage payment will typically include escrow for your homeowner’s hazard insurance. Failing to maintain proper coverage could result in your lender recalling the loan.