By definition, hazard insurance is a type of policy which protects your property from various hazards such as fire, hail storm, earthquakes, vandalism, burglary, and other kinds of damages as long as they are specified in the policy.
You, as a property owner, will be required to pay for the hazard insurance yearly premiums. This type of insurance policy is imposed by lenders before they will issue a mortgage loan. In this way, the lender (usually the bank) can assure that they will not lose their investment in you.
How much do you need to pay for hazard insurance?
Occasionally, a hazard insurance policy is written for one year and is renewable. This policy, aside from the fact that it is an important requirement for house loans, must be paid together with property taxes in a monthly, quarterly, or annual mortgage payment scheme (though a monthly scheme is common).
The amount of the premium required greatly depends on the current market value of the property, the policy limits, and the amount that would cost you to repair the house or the lender’s loss in the event the property is damaged or totally destroyed by certain natural hazards.
Not all hazard insurance policies cover all damages or losses caused by natural events and accidents, though. Because of this, some would opt to get a reliable homeowners insurance for maximum protection to the property, to them, and to the house loan provider.
How is it different with homeowner’s Insurance?
To make it clear, hazard insurance is only a part of homeowners insurance, which mainly covers the property structure only. If the lender bank requires you to get property insurance before they can allow you a mortgage, it is better to get the standard homeowners insurance policy to gain full protection and to satisfy their requirement.