Hazard insurance is actually part of a homeowners insurance policy. In fact, it may be the coverage part most homeowners associate with insurance because it covers the structure of your primary residence. But most home insurance policies have additional coverage parts that protect more of your property as well as your liability.
Let’s take a closer look at the differences between hazard insurance and home insurance so you can be sure you have the right coverage for your property.
What is hazard insurance?
Hazard insurance protects the physical structure of your home against specific losses, such as fire or wind. This is typically the minimum insurance mortgage companies require to secure a loan, but that doesn’t mean you need an additional policy. The dwelling coverage in your home insurance is hazard insurance, so if you have that, then you have the right type of coverage.
Whatever you call it, hazard insurance helps you recover when the physical structure of your home is damaged. The physical structure includes your home’s foundation, roof, and walls, but it may also include certain fixed appliances, countertops, flooring, and other permanently attached fixtures. When covered losses occur, your insurer reimburses you for the costs you incur to repair the damage.
On the other hand, hazard insurance doesn’t have all of the coverage parts that home insurance policies have. It doesn’t cover other sources of loss like liability claims or injured guests’ medical costs. Other structures on your property, such as a detached garage, are not usually protected by hazard insurance, nor are your personal belongings. Damage to these types of structures isn’t covered by hazard insurance.
Covered perils in hazard insurance
Most insurance companies offer hazard insurance that covers your dwelling on an open peril basis. When you have open perils coverage, you're covered for any loss caused by any peril except for those specifically listed in the policy as exclusions.
The specifics can vary by insurance company, but open perils coverage means you’re typically protected in losses caused by common problems homeowners face, such as:
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Fire or lightning.
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Windstorm or hail.
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Riot or civil commotion.
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Smoke.
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Vandalism or malicious mischief.
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Theft.
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Weight of ice, snow, or sleet.
However, hazard insurance typically excludes damage caused by general wear and tear, intentional acts, and neglect. Moreover, most policies don’t cover flooding, even if your mortgage company requires it. For that, you’ll need flood insurance.
Coverage can also vary significantly based on location. For example, home insurance companies may exclude coverage for wind damage in areas prone to hurricanes.
What is home insurance?
While hazard insurance refers to the portion of your homeowners policy that covers the structure of your home, home insurance includes it plus additional coverage parts that protect homeowners in other losses they’re likely to face.
Dwelling coverage
As we mentioned, dwelling coverage is essentially hazard insurance, so it covers the physical structure of your home, such as the roof, foundation, walls, windows, installed cabinets and counters, and permanently attached appliances.
Other structures coverage
Other structures coverage is similar to dwelling coverage, except it responds to losses involving structures on your property other than your primary dwelling. Some examples of other structures include detached garages, fences, sheds, or greenhouses.
Liability protection
Personal liability coverage protects you should someone outside of your immediate family claim you caused their bodily injury or property damage. If the issue ends up in court, personal liability insurance helps in your defense.
Personal property coverage
Personal property coverage is for the contents of your home, such as your clothing, furniture, and electronics. Many policies also cover your belongings beyond your primary residence – like a laptop stolen at a coffeeshop.
Loss of use coverage
Loss of use coverage helps with additional living expenses if a covered peril forces you to stay somewhere other than your home. For homeowners who are also landlords, this coverage can also cover lost rental income.
Medical expense coverage
Medical payments coverage helps with a guest’s medical bill if they’re insured at your home.
Key differences between hazard insurance and home insurance
Identifying key differences between hazard insurance and home insurance isn’t easy because the former is a subset of the latter. That said, you do want to be able to distinguish one from the other so you don’t end up buying insurance products that don't fit your needs – or your mortgage loan requirements!
Scope of coverage
The biggest distinction between hazard insurance and home insurance lies in the scope of coverage. Hazard insurance only covers the structure of your home and usually nothing else. And while there are several types of home insurance policies, most cover the structure of your home plus other things, such as liability, personal property, and other structures.
Cost
Your homeowners insurance premium can be a few hundred to a couple thousand dollars each year based on how much coverage you need, where your home is located, and what insurance company you use. Hazard insurance is almost always included in that cost.
Mortgage requirements
The term “hazard insurance” is commonly used by mortgage lenders to identify the type of coverage they require before they sign off on a loan. But that doesn’t mean it’s a separate policy from home insurance. In fact, some mortgage companies may also require some of the other coverage parts found in a standard homeowners insurance policy.
How to choose the right coverage
Luckily, you don’t have to choose between hazard insurance and home insurance. If you have a home insurance policy, then you have hazard insurance.
That said, you want to make sure you have enough hazard insurance included in your home insurance so that you can recover should you ever face a catastrophe or natural disaster. You can start by estimating the replacement cost of your home. It’s the basis for figuring out how much home insurance you need.
But don’t forget that home insurance is required by most mortgage lenders, so check what your lender requires when shopping for a policy.
And if that all sounds like a lot, then get in touch with an insurance agent or broker. Either one can help you determine if you have sufficient coverage.
