The number one misunderstood insurance term, hazard insurance, is a term most mortgage lenders use but not insurance agents. For this reason alone most customers don’t understand what hazard insurance is or what to expect for it. The most common term is home or homeowners insurance. Hazard insurance is a term that banks use to make sure that there home is protected against perils that could damage the home. The most devastating perils that a home faces include fire, tornadoes, or hail damage.
Hazard Insurance, Home Insurance, Homeowner’s Insurance… all the same thing.
When Shopping for Homeowners Insurance These are the Things to Know:
Remember that all insurance companies collect information on the client and the home to create a rate. Most of the insurance companies score the client with metrics that include FICO score and how they pay their bills. The pertinent information on the house are what the insurance companies use to come up with the replacement cost.
Replacement cost formulas vary from company to company. Refer back to my previous article on AMT.com to understand replacement cost estimators.
Another factor in creating the rate is the distance between the home and closest fire station. The greater the distance the more expensive the premium. This is why, back in the day, Hazard Insurance was called Fire Insurance.
How is Hazard Insurance affected in today’s real estate market of short sales and foreclosures?
A good tip for shopping hazard insurance is to note there is a difference between occupied and non-occupied homes. When purchasing hazard insurance, the rules for owner occupied and landlord properties are very similar. They are both preferred and the rates are cost effective. On the flip side, vacant investment properties (non-occupied) throw up red flags.
These homes would be considered a higher risk and would be placed in a standard company versus a preferred company, which will result in a higher premium.
The consumer today is shopping their insurance with a greater frequency. Above are the basics on what you need to know when you are shopping for hazard insurance.
If you have any questions, or would like to discuss any of these items in further detail, please feel free to Contact Mark Fortuna.