If you have a mortgage, chances are you know you're supposed to have hazard insurance. But what is it and how does it differ from home insurance? Find out.
Hazard insurance vs homeowners insurance
If you took on a mortgage loan to buy your home, chances are your lender required you to carry “hazard insurance.” If you already have homeowners insurance, rest assured: hazard insurance is almost certainly included. Either way, here’s a breakdown of what home hazard insurance is and why you need to have it.
Hazard insurance: Coverage for the structure of your home
Essentially, hazard insurance (also sometimes called “dwelling coverage”) is coverage that protects only the structure of your home: bricks, shingles, window panes, doors. The house itself.
Mortgage companies want you to have this coverage because they’re financially invested in the structure: they’ve fronted you the money to purchase this house. Until you’ve paid off the loan, the house itself is the mortgage lender’s biggest bargaining chip: if you stop making payments, for example, they can foreclose on it and resell the property to recover some of their loss.
If a fire burns the house down, the insurance ensures that it will be rebuilt – and you won’t just walk away from whatever debt remains on the loan. In other words, it’s in the mortgage lender’s best interest to make sure there’s a plan for fixing anything that goes wrong with the house.
Typical hazard insurance offers protection for damage to your home caused by events (also called “perils”) such as…
- Lightning.
- Fire.
- Theft and vandalism.
- Hail.
- Falling objects.
- Wind.
Most hazard insurance policies (and most standard homeowners insurance policies, for that matter) do NOT offer coverage for damage caused by…
- Mudslides.
- Landslides.
- Sinkholes.
- Floods.
What hazard insurance doesn’t cover
Besides excluding structural damage from certain types of events, hazard insurance also doesn’t offer coverage for the following:
- Your personal property, including anything that can be picked up and moved around inside your house. This is protected by contents coverage.
- Medical expenses if a guest is hurt in your home.
- Personal liability expenses if a hurt guest sues you.
- Loss of use of your home (when you need to stay in a hotel because your home is temporarily unlivable).
The good news: a standard homeowners policy includes not only hazard insurance but also everything listed above.
Homeowners insurance = hazard insurance + much more
Chances are, if you’re buying a home, you’re planning to get insurance regardless of what the mortgage company requires you to do. And even if you’re paying cash for your home, hazard insurance makes sense. It’s just plain smart to protect the single biggest purchase you’ve ever made.
The bottom line about hazard insurance is that you don’t have to shop for it separately from your regular homeowners insurance. It’s standard practice for insurance companies to include it in a homeowners policy (after all, it wouldn’t be much of a policy if it didn’t protect the home itself). In some policies, you’ll see it referred to as dwelling insurance, but no matter the name, it offers the same protection: coverage for the physical structure of your house.
Ready to find out how much you’ll play for a homeowners policy that includes hazard insurance, contents coverage, personal liability, and more? Get a quote in two minutes or less. If you like what you see, we’ll probably be able to get you covered within a business day.
