Buying a house is a major investment that needs protection. When applying for a home loan, your bank may mention two insurance coverages that may sound similar: hazard insurance and homeowners insurance. While both protect your property, they serve different purposes.
Choosing the wrong one can lead to inadequate coverage or unnecessary costs. This blog will help you understand the difference between home insurance vs hazard insurance, including what each covers and their benefits.
What is hazard insurance?
Hazard insurance is a coverage that protects your home’s structure against damages caused by “hazards” or natural disasters. These hazards could be fire, storms, floods, earthquakes, etc. The coverage financially protects the physical building itself rather than the interiors, furniture or belongings inside.
Benefits of hazard insurance
Here are the key advantages of hazard insurance for homeowners:
- Financially protects your home: The coverage provided by hazard insurance helps you rebuild or repair your home without exhausting your savings.
- Satisfies lender requirements: All mortgage lenders have mandated hazard insurance as part of your loan disbursal because it protects the lender’s financial interest in the property.
- Essential if you live in high-danger regions: Many Indian states are prone to floods, cyclones and landslides. Hazard insurance helps you avoid out-of-pocket expenses for major structural repairs caused by these risks.
What is home insurance and what does it cover?
Home insurance is a comprehensive policy that protects both your home’s structure and its contents from different types of risks.
Homeowners insurance and hazard insurance are bundled together in a single policy. But home insurance also covers your personal belongings, like furniture, jewellery, electronics and appliances, provides liability coverage and offers additional living expenses if you can’t stay in your damaged home.
Benefits of home insurance
Home insurance provides several advantages that make it worth considering:
- Offers complete financial protection: Since home insurance covers personal belongings, you can get compensation for damaged furniture, electronics, jewellery, clothing and even fixtures and fittings.
- Covers liability: If somebody gets hurt on the property or you accidentally sabotage someone else’s property, home insurance will cover these liabilities.
- Offers flexibility in choosing coverages: The policy can be customised based on the needs and budget.
- The claim process is more comprehensive: Claims for various issues such as fire damage, water leakage or burglary can be registered under one policy, unlike hazard insurance, which offers limited coverage.
Key differences between hazard & home insurance
Identifying the key differences between hazard insurance vs homeowners insurance side-by-side will help you choose the right plan for your home. Here’s a complete comparison:
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Factor
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Hazard insurance
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Home insurance
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Coverage
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Only covers your home's structure against specific perils like fire, lightning and windstorms.
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Provides structural coverage plus protection for personal belongings, liability claims and additional living expenses.
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Cost
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Costs less because it provides limited coverage for basic structural protection only.
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Costs more but offers comprehensive protection for multiple risks and various situations you might face.
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Lender requirements
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It is compulsory for mortgage loans.
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It is not compulsory but highly recommended for both home loans and mortgage loans.
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Claim registration
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You can only file claims when your home's structure suffers damage.
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You can file claims for various situations that’s mentioned in the policy document, including injury and temporary relocation.
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Personal belongings
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Does not cover contents of the house.
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Covers valuables, modular interiors, expensive hobs and appliances, jewellery and more.
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Third-party liability
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Does not protect other individuals or properties.
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Protects you financially and legally from third-party damage.
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Customisation
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Cannot be customised.
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You can customise with various add-ons and specifics.
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Conclusion
If you have clarity on “are homeowners and hazard insurance the same,” choose the product that suits your location and risk exposure. If you live in a low-risk area and only want basic protection, hazard insurance does the job well.
But if your home, its interiors and your belongings are expensive and are constantly exposed to several risks, a full-home insurance plan can provide better protection.
FAQs
- Is hazard insurance the same as homeowners insurance?
Hazard insurance is only a part of home insurance and covers the structure of your house, including garage and deck, from various natural and man-made disasters. On the other hand, homeowners’ insurance covers both the structure and its contents.
- Do I need to buy both hazard and home insurance?
No, you don’t have to because home insurance policies come with hazard coverage. However, please read the policy terms before buying.
- What factors should I look for when buying home insurance?
Review the risks covered, the sum insured, add-ons, claim process and premium. Don’t forget to compare policies online to get the best deal.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.