In the world of insurance, the terms hazards and perils in insurance are often used interchangeably when it comes to hazard insurance. Especially when it comes to describing the various risks faced by insureds and insurers. However, these ideas are interconnected. Both terms have specific applications and can be further broken down into various subcategories.
Hazards And Perils In Insurance
Table Of Contents
First, a hazard describes anything that increases the potential for a loss. (An unintended, unforeseen event that causes injury to an insured or damage to property
For insurance purposes, hazards are classified as one of four types:
- Physical hazards.
- Legal hazards.
- Moral hazards.
- Morale hazards.
A physical hazard increases the likelihood of a loss occurring due to inadequacies in the condition, structure, or operation of an insured or insured property. For example, a roof covered with heavy snow might be considered a physical hazard when it comes to homeowner’s insurance, including High-Value home insurance. At the same time, a health insurance policy might consider an insured’s heart condition to be a physical hazard.
A legal hazard meanwhile, increases the likelihood and severity of a loss due to a condition imposed by the legal process that forces an insurer to cover a risk that it would otherwise deem uninsurable. For example, the American legal system motivates many people to bring litigation suits in order to realize the potentially lucrative profits in doing so. Anything that might prompt a lawsuit involving an insurer can be considered a legal hazard.
Moral Versus Morale
A morale hazard, as the name might suggest, results from fraudulent acts committed by an insured. Examples of morale hazards include filing false insurance claims or misrepresenting oneself on a life insurance application in order to obtain coverage or more favorable coverage terms.
Not to be confused with morale hazards, a moral hazard results from a lack of reasonable care put forth by an insured. For example, consider an insured whose wallet is stolen from his car because the doors were left unlocked. This would be a morale hazard, as the insured did not take the necessary care to prevent his valuables from being stolen.
Moral Vs. Morale Hazards
- The difference between a moral hazard and a morale hazard is the intent.
- A moral hazard arises out of an individual’s deliberate intent to deceive.
- A morale hazard, on the other hand, results from unintentional carelessness or laziness.
We also need to think about the difference between risk peril and hazard.
Perils In Insurance
When used in the insurance industry, the term peril applies only to property insurance. While perils and hazards sound similar, a peril actually results from a hazard. A hazard merely increases the likelihood of a loss. And the peril is the specific event that causes a loss.
- A roof covered with snow can be a physical hazard in insurance. If the amount of snow is so great that the roof ultimately collapses, then the snow is the peril.
- A fire breaks out in an office building, which causes the sprinkler system to activate. This causes considerable water damage. Even though the fire caused the problem, the water damage itself is the peril.
- A burglar breaks into a restaurant safe and steals a great deal of money. In this case, the act of theft is peril.
Property insurance often covers many different types of perils in insurance. However, certain perils (such as floods or earthquakes) can be excluded from coverage due to the catastrophic amount of havoc they can wreak.
Those who wish to know more about common perils covered (or excluded) under a property insurance policy should contact a property insurer or their local insurance department. We hope you have learned more about the differences between Hazards And Perils In Insurance.
What Is Hazard Insurance And Is It Just Home Insurance
Think of hazard insurance the same way you would think of your body. You have a skeletal system and your backbone is what holds you up and makes sure you walk day today. Hazard insurance is much like the backbone of your homeowner’s policy. Your policy will have hazards and perils included and Hazard insurance is the piece that provides financial protection for your home and other personal belongings against those hazards and perils that are included in your policy. If you are ever forced to relocate because your home is damaged in a Tornado, fire, or other unfortunate reason your home might be destroyed by a covered peril, Hazard insurance covers your living expenses.
You are probably asking what EXACTLY it is that Hazard insurance does or what hazards are actually covered. You are also probably also asking how much hazard insurance do you need to cover your house. The answer to this question can depend on a lot of different factors including where you live, how old your house is, what the value of your home is, and a few more things.
What Does Hazard Insurence Actually Cover Or Typically Cover
When you purchase your homeowner’s insurance policy it should include 3 types of protection against hazards otherwise known as perils.
- Dwelling Coverage
- Structures Other Than Where You Dwell
- Personal Property
These coverages which fall under the umbrella of Hazard insurance might help reimburse you for some of these covered perils.
- Power surges
- Civil unrest or riot
- Water damage caused by a pipe burst or appliance
- Falling Objects
- Damage caused by snow, ice, or sleet
- Falling Objects
We should always take into account that not all policies are going to be the same. You must always read through your policy closely and talk it over with your agent. This way you will have a good understanding of the risks that may or may not be covered by your Hazard or Perils insurance policy. One thing to think about in Missouri, especially the St. Louis area, is that earthquakes are usually not covered under a homeowner’s policy.
How Much Will A Hazard Insurance Policy Cost You
Hazard insurance is tied into your homeowner‘s policy and you won’t pay for it as a separate policy. The cost will be included with your premium that includes the entire homeowner‘s policy. As stated above your insurance policy will increase with Hazard coverage based on different factors.
- What your home is made of
- If your house has certain security features
- The policy limit that you choose
- The policy deductibles you choose
- How old your home is
- The Value of your home
There is research that has been done that shows the average cost of a homeowner’s insurance policy is $1,083. In the end, this depends on a lot of things, but 2 obvious ones are where you are located and what type of home you have. If you have a newer home you will probably pay lower rates while an older home will likely cost you more. Reasons for an older home costing more include damages the home may have received from hazards and will cost more to repair.
Other Factors To Think About
Other factors to think about are homes made of stone or brick that could receive a discount. If your home is built using wood and especially if your home is in a dry area where wildfires are possible you most likely will not see a discount and will possibly pay more. Certain security features installed in your home could also lead to a premium discount. If you’re interested in viewing other areas for consideration, view our 12 Insurance Related FAQs Blog.
Your policy limits and deductible will also affect your premium. Just like with car insurance, if you have a high policy limit with a lower deductible you will most likely pay more for your monthly premium. Policy limits can all be customized when purchasing your premium.
Insurance Advisors Of St. Louis have a group of independent insurance agents that will help you through the entire homeowners, hazard, and perils insurance process. We will find the best policy for your home, car and other insurance needs while also getting you the best price since we have many companies to choose from.