closing

hazard insurance

Hazard insurance is property insurance protecting against physical damage from perils such as fire, wind, hail, and theft, typically included in a homeowner's policy. Mortgage lenders require it as a loan condition, often naming themselves as loss payee, and frequently collect premiums through an escrow account. Standard policies usually exclude flood and earthquake damage, which require separate coverage.

Exam tip
Hazard insurance is the "I" in PITI. Remember that flood damage is excluded and requires separate flood insurance where required.
Example
Before closing, the buyer must show a homeowner's policy with $350,000 in dwelling coverage, and the first year's premium is paid at closing.

Related terms & state variants

Sources

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Last verified: 2026-10-23