What you need to know about Hazard Insurance

Hazard insurance is a coverage policy for property owners against different hazards (fire, earthquake, flood, and other natural disasters). If an insured gets coverage for a named peril, they get compensated for the damage incurred by it. A standard homeowner’s insurance will include hazard insurance but might not cover all hazards.

What is the difference between Homeowners Insurance and Hazard Insurance?  

Well, homeowner’s insurance might not include all the coverage for the loss that’s not a part of the existing plan. Or it might be more than what your clients need. Homeowners insurance includes the entire policy with bodily injuries, and standard hazard insurance only covers the property damage. Hazard insurance goes into specific perils. So, your clients will be able to select the coverage they require individually. Hazard insurance is the additional policy you add in homeowner’s insurance.

As an agent, you can provide your agents with options others won’t. They are more likely to come to an agent that provides them with what they need rather than what the agents present.

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Who needs hazard insurance?

The average cost of homeowners insurance(2019) is now 50% higher than it was 10 years ago. Although different states have different markets, the value and the demand for home insurance has a steady rise. And with the rise of homeowners insurance, increases the need for hazard coverage.

Most people confuse hazard insurance and homeowner’s insurance. They both might fall under the same category, but they are not the same. Hazard insurance is just a part of homeowner’s insurance.

A natural event that occurs frequently might not include in a standard homeowner’s policy. An insurer will suffer a massive loss if they cover an earthquake policy with a standard homeowner’s policy.

Reason? If the event is too frequent, there will be too many claims to deal with regularly.  

So, the insurer charges typically extra premium. The insured might have to add additional coverage in some cases. The insured might think they already have homeowner’s insurance for incurred damage through disasters but might end up not having adequate coverages.   

Owners of beachfront property will want additional coverage against storms and hurricanes. Their homeowner’s policy might not include that. You bring that to their attention, and they are more likely to add that to their existing plan. The same goes for people living in earthquake-prone areas.   

Additionally, when buying a house, people tend to rely on mortgages. Since most of the mortgage lenders seek a certain level of insurance that covers different hazards, this is where you come in. Provide your customers with the right coverage they need to build and preserve their future home.   

Wind damage is the most common cause of a claim while Fire Hazard is the most costly of homeowner’s claims in the US. You can find more detailed info on that here.

The market hazard insurance provides.  

A typical homeowners’ insurance policy usually won’t cover all activities that could damage the property. Especially if an area is marked as a danger zone, that specific peril needs to be covered separately. Beachfront properties are prone to hurricanes. If zoned as a dangerous area or accident-prone area, the premium will rise accordingly. 

Take Florida for example. Florida is a hurricane-prone area (120 hurricanes, 37 major ones before 2019). Since storms and hurricanes are more like to hit Florida, the premium will be higher. The cause? The risk for the bearer increases with a higher occurrence rate.  

FACT: Florida has the highest average homeowner’s insurance premium ($171 monthly and $2,055 annually).

The cost of hazard insurance is not specified. It depends on where the location of the property and how frequent the disaster is. Additionally, the property value and the anticipated hazard plays a role in deciding the premium as well.  

As the agent, you need to bring your client’s attention towards hazard insurance. These are essentially bonus coverage your clients might want to add on top of their homeowner’s insurance, especially if living in areas prone to the disasters. A better service will always win the agent bonus points. So why not earn it?  

Did we miss something out? Let us know in the comments below! 

Learn how you can flourish as an agent after one call!

Schedule a call right now and learn how you can ease your work, sell more, and increase your profits!

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