Hazard Insurance vs. Homeowners Insurance and Coverage

When it comes to hazard insurance vs. homeowners insurance, many people don’t know the difference. Hazard insurance isn’t actually a separate policy; it’s just one part of a homeowners policy. Specifically, it’s the part that will pay to replace the structure and contents of your home in case of a natural disaster.

The rest of your homeowners policy will protect you from other types of loss, damage and theft. Homeowners insurance also covers medical bills if someone is injured at your house, as well as legal bills if they decide to sue you for their injuries.

Insuring your home can be a confusing, tedious process. There are terms to know, costs to weigh, and coverage to compare. Things can get even more confusing when you’re asked by a mortgage lender to secure hazard insurance, which sounds like additional coverage on top of your typical homeowners policy.

That’s just the tip of the insurance iceberg, though. Let’s take a closer look at both hazard and homeowners insurance to find out what they are, what they cover and why both are necessary to protect your home.

What is hazard insurance?

Hazard insurance is the part of a homeowners policy that protects your home from damage caused by a “hazard” or natural disaster. It generally covers damage or loss to the structure of your house, the other structures on your property — a basketball court or detached garage, for instance — and your personal property against damage from the hazards outlined in your policy.

Every insurance company has a different list of approved natural disasters that qualify for hazard insurance coverage. Typically, hurricanes, tornadoes, blizzards, explosions, eruptions and other extreme weather events are covered. If a natural disaster damages your home or personal belongings, you file a standard insurance claim and you get reimbursed for the repairs.

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All homeowners insurance policies come with hazard insurance, but it’s still an important component of your policy. Without hazard coverage in your homeowners policy, you’d be footing the bill for the cost to replace your entire home if a freak windstorm or an explosion knocked it down, and you’d also have to replace the built-in appliances, plumbing, flooring, and roof.

What does hazard insurance cover?

What hazard insurance covers will depend on your specific policy, but it generally provides coverage for 16 major perils, including:

  • Fire or smoke
  • Lightning
  • Hail and windstorms
  • Theft
  • Vandalism
  • Damage from vehicles
  • Damage from aircraft
  • Explosions
  • Riots and civil commotion
  • Volcanic eruption
  • Accidental discharge or overflow of water or steam
  • Falling objects
  • Freezing of household systems like AC or heating
  • Sudden and accidental damage from an electrical current
  • Weight of ice, snow or sleet

While it may not be likely that you’ll need to use your hazard insurance, it’s possible. For example, if there’s flooding or tornado damage to your home, the hazard insurance policy will be what pays for the cost to repair or rebuild it. There are a couple of natural disasters that aren’t covered by standard hazard insurance, though. Earthquakes, mudslides, landslides and flooding aren’t part of a regular hazard policy, so if you’re at risk for any of those issues, you’ll want to purchase supplemental insurance on top of your regular policy.

Who should get hazard insurance?

Everyone who has a homeowners insurance policy automatically has hazard insurance, but this type of coverage is more valuable to homeowners in certain locations. Specifically, homeowners in states that face a high risk of natural disasters are more likely to file a hazard insurance claim.

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Homeowners in states that get hit by hurricanes, like Florida, Louisiana, Texas, North Carolina and New Jersey, should have hazard insurance to protect against hurricane-related damage. Additionally, homeowners in midwestern states, like Oklahoma, Nebraska and Kansas, should have hazard insurance to cover their home in the event of a tornado.

What to look for when shopping for hazard insurance

Hazard insurance is part of your homeowners policy, so you’ll want to make sure your homeowners policy is as comprehensive as possible. Not all policies are equal, though. The easiest way to handle it is to ask yourself what you need covered and then make sure any plan you consider includes it.

If you live in an area that’s prone to earthquakes, mudslides, or landslides, or you’re in a floodplain, you may have to purchase supplemental coverage on top of regular hazard coverage. Earthquake insurance and flood insurance are both sold through most private insurance providers.

How much hazard coverage do you need?

How much will it cost to replace your home if it’s totally lost to a disaster? That’s how much hazard coverage you need. That dollar amount should take into account the cost of your home, the value on the current market and the cost to replace the contents of your home.

Companies that offer hazard insurance

Any company that offers homeowners insurance offers hazard insurance. That includes most of the major insurance companies, like Nationwide, Allstate, State Farm, Hartford, Liberty Mutual and others. Check around to determine what companies service your state or area and go from there.

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How much does hazard insurance cost?

The short answer is: it varies. You need to shop around for homeowners insurance that includes hazard coverage for what you need. Your policy won’t be useful if it excludes tornado damage and you’re in “Tornado Alley,” nor will it be useful if you are in southern California and forego supplemental earthquake insurance.

So how much does hazard insurance cost? There are a few basic factors that will help determine the cost of your premium, including:

  • The age and value of your home
  • The materials your home is made of
  • The type of policy limit you choose
  • The policy deductibles you choose
  • Whether your home has certain security features

The easiest way to tackle it is to decide what you need, shop around for the best price and coverage. When deciding your hazard vs. homeowners insurance coverage levels, make sure any policy you consider will actually cover what you need it to cover

And make sure your deductible is affordable for your budget. Your policy won’t do you any good if you can’t afford the deductible when disaster strikes, so it may be worth paying more each month for a policy with a lower deductible.