What Is Hazard Insurance?

Updated · May 13, 2022

Most people think of insurance as a way to safeguard themselves and their families against financial ruin in the event of an accident.

And while that is certainly an important function, it is not the only one.

Insurance can also serve to protect your home from adverse events.

That's where hazard insurance comes in.

What Is Hazard Insurance?

Hazard coverage is the part of your homeowner policy that safeguards the structure of your home against perils.

Perils are adverse events that may cause loss or damage to your property or belongings. These can be fire, lightning, windstorm, theft, and so on.

Hazards in insurance are circumstances that make a peril more likely to occur.

Lenders often require home insurance with coverage for perils, but they refer to it as "hazard coverage.”

This led to some confusion about the meaning of the two terms.

By definition, hazard insurance protects the structure of your property and outbuildings, such as sheds or garages.

Depending on the provider, it may also cover furniture and your personal belongings.

But when they say “hazards,” people often refer to the types of perils the insurance policy covers.

Let’s see what these are.

What Does Hazard Insurance Cover?

Home insurance usually includes the following adverse events, among others:

  • Fire
  • Theft
  • Weather damage
  • Vandalism
  • Damage from vehicles or aircraft
  • Explosion
  • Smoke damage

That said, insurers often exclude damage caused by earthquakes or flooding.

Plus, depending on the hazard insurance policy, there may be limits on the amount of coverage you can get for certain types of damage.

For example, since wildfires are a common disaster in Florida, hazard insurance for fire and lightning may be more expensive there compared to other states.

What’s more, hazard insurance for your home doesn’t cover the natural wear and tear of the property.

It also excludes damage from the intentional acts of the policyholder or related parties.

What Is the Cost of Hazard Insurance?

Recent data shows that the average cost of home hazard insurance in the US is $1,272 a year.

That said, this depends on a number of factors:

  • The value of your property
  • Your home’s location
  • Your property’s age
  • The size, structure, and construction type of your home
  • The amount of coverage you want

Hazard Insurance vs. Home Insurance

Is hazard insurance the same as homeowners insurance?

These terms are often used interchangeably. But as we explained, they are not the same.

In insurance, hazards are` only a part of the entire homeowner policy.

Home insurance covers your property from damage from a variety of perils, including fire, wind, and theft.

Hazard insurance is dwelling coverage for the structure of your home.

You usually get it as part of your homeowners insurance.

What Is Hazard Insurance on a Mortgage?

Most lenders require hazard insurance as part of the mortgage agreement.

Why?

Since your home becomes collateral for the loan, they need to ensure it’s protected.

And they only require hazard insurance since they want the structure of your property intact.

The rest of the home insurance protects other aspects of your property and belongings too. So, it is to your own benefit to have it.

Wrap Up

Home insurance protects your property from losses due to fire, theft, weather damage, and other perils.

Plus, you may need hazard coverage if you’re applying for a mortgage.

But what is hazard insurance?

Is that the same as homeowners insurance?

How much does it cost to insure your property?

Find the answers to these questions above. Then, use the knowledge to get the best protection for your property.

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Aleksandra Yosifova
Aleksandra Yosifova

With an eye for research, Aleksandra is determined to always get to the bottom of things. If there’s a glitch in the system, she’ll find it and make sure you know about it.