What is Hazard Insurance? And Do I Need It?

Dear Insurance Adviser,

What is hazard insurance? Is it the same as homeowners insurance? Do I need to have both?

- Helen Hazard

Dear Helen,

Strictly speaking, there is no such thing as hazard insurance. A hazard is a condition that increases the chance of something adverse happening. Ice on the driveway in the winter increases the chance of someone falling and getting hurt. The ice is a hazard. Bald tires and worn-out brakes are hazards. They increase the chances that you could have a serious car accident.

The point I'm making is that you don't buy insurance against hazards. Hazards are conditions that increase the chances that you'll use your insurance. Hazards, in other words, are things to minimize or avoid if you can.

I should say, however, that I have seen the term "hazard insurance" used incorrectly on mortgage loan applications. If that's where you're seeing it, yes; it does mean homeowners insurance. The financial institution is looking for proof that you have your home insured and that its interest is protected.

Stay safe.

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