Hazard insurance is a standard part of most real estate transactions, but the truth is that hazard insurance is typically not required by law. Often called homeowners or fire insurance, hazard insurance is required by the mortgage lender, whenever mortgage financing is involved. Even if hazard insurance were not required, it would be foolish for homeowners or investors not to have adequate coverage.
Simple fire insurance policies have been in use since the 17th century, particularly after the 1666 Great Fire of London. Early fire insurance policies tended to heavily favor the insurer with an abundance of fine print that severely limited the policyholder's protection. It wasn't until the late 19th and early 20th century that policies began to provide a more balanced agreement, but policies still tended to favor the insurer.
The original fire insurance policies were just that. They only covered fire damage. It has only been in the past century that more expansive hazard insurance coverage has developed. This article will review the development and current state of hazard insurance in the following sections:
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