Just like some risks may be hazardous to a person’s health, there are risks that can be hazardous to a home’s health as well. Usually these risks come in the form of natural disasters like windstorms and rainstorms. As a result, mortgage lenders require homeowners to have hazard insurance and homeowners insurance.
What is the difference between them?
The difference between hazard insurance and home insurance is fairly simple: hazard insurance is a subsection of a larger homeowners insurance policy. As a result, if a homeowner has home insurance, they already have hazard insurance.
Whereas hazard insurance only covers damage to the structure of the home, homeowners insurance covers damage to the home, damage or theft of personal property, and personal liability. The two are packaged together to offer homeowners comprehensive coverage for their home and belongings.
What is hazard insurance?
It’s important to know that hazard insurance is the same as the dwelling portion of a homeowner’s standard home insurance policy. Hazard insurance is a basic coverage that protects the structure of a home from damage caused by perils both natural and man-made. This includes a home’s walls, roof, foundation, ceilings and built-ins like kitchen cabinets and plumbing.
Hazard insurance does not cover a homeowner’s personal belongings, other structures on the property, or liability. Home insurance does that. As a result, a homeowner needs much more than just hazard insurance to be fully protected.
What’s covered
There are numerous hazards that can damage the structure of a home—and they’re not all weather related. Here are some that are usually covered by hazard insurance:
| Fire and smoke | Wind |
| Hail and sleet | Lightning |
| Rainstorms | Vehicles |
| Fallen trees | Riots |
| Weight of ice and snow | Explosions (e.g., from gas leaks) |
| Vandalism | Structural damage caused by theft |
What’s not covered
Here are some hazards that typically aren’t covered:
| Flood | Mold |
| Earthquake | Pest infestation |
| Landslides | Wear and tear |
| Mudslides |
Additionally, hazard insurance does not include the following coverages:
- Personal Property – Covers the cost of personal property damage or theft. Applies to personal belongings inside and outside of the home, such as furniture, televisions, computers and some jewelry.
- Additional Living Expenses (or Loss of Use) – Pays for lodging, restaurant meals and other related costs if a homeowner needs to vacate their home due to severe damage.
- Liability – If a guest is injured on the homeowner’s property, liability coverage may help pay for any legal expenses and medical bills. The homeowner must be legally responsible for liability insurance to apply.
Extra protection
With the number of severe weather events increasing due to climate change, homeowners may want to consider extra protection for their home above and beyond what their hazard insurance covers. For example, homeowners can purchase separate flood coverage and separate earthquake coverage if they live in an area prone to natural disasters.
How much does hazard insurance cost?
Since hazard insurance is part of a homeowners policy, it is hard to identify a single average amount for hazard insurance. Additionally, there are many variables that affect the cost of homeowners insurance, and thus affect the cost of hazard insurance. These variables include the home’s value, where the home is located, policy limits, the deductible amount and the homeowner’s credit score.
Do you need hazard insurance?
If you have a home, you definitely need hazard insurance. There are two main reasons:
- Mortgage lenders usually require proof that you have a certain amount of hazard insurance before issuing a loan. Because hazard insurance is part of your overall home insurance policy, just purchasing reliable home insurance should satisfy their requirements.
- As unlikely as disasters are, they can and do happen. Whether a vehicle drives into your home or a tree falls on your roof, you want the structure of your home to be protected at all times.
A mortgage lender may require additional hazard coverages, depending on the type of natural disasters that occur in a particular region. Every lender and location has different requirements.
