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Hazard insurance is another name for home insurance, which covers your home and belongings against certain hazards, or perils. While hazard insurance is not a state-mandated requirement, it is usually required if you have a mortgage. Even if your home is paid off, having a homeowners insurance policy in place is a valuable financial tool to help you pay for damage to your home and belongings from covered losses. Before you buy hazard insurance, it is important to understand what it is, what it covers, how much it might cost and the type of coverage you should buy.
What is hazard insurance?
Hazard insurance is the part of a homeowners policy that covers damage to your home’s structure from covered losses, such as fire, hail and vandalism. Hazard insurance is also commonly called “dwelling coverage.” It generally covers damage or loss to the structure of your house, the other structures on your house and the other structures on your property — such as a detached garage, fence or in-ground swimming pool. Non-structural items, such as furniture, electronics and clothing, are covered under a separate section of homeowners insurance policies, often referred to as “personal property insurance.”
In addition to perils mentioned above that impact your dwelling, 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 listed as covered perils in a standard homeowners policy. Suppose a covered hazard damages your home. In that case, you would need to file an insurance claim with your carrier and, if approved, you would get reimbursed for the repairs, minus the deductible.
All standard homeowners insurance policies include hazard insurance. Without hazard coverage, you would be financially responsible for covering the entire cost of repairing or replacing your home after events like a break-in, severe windstorm or an explosion. This would include replacing the roof, walls, plumbing, wiring, appliances, electronics, furniture and clothing.
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
- Hail and windstorms
- Damage from vehicles
- Damage from aircraft
- 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
Damage sustained from floods and earthquakes are not covered by standard hazard insurance and require separate policies or endorsements.
How much does hazard insurance cost?
The short answer is that it depends. You’ll want to shop around for homeowners insurance that includes hazard coverage tailored to your needs. If you live in a state prone to tornadoes, for example, you’d likely want to ensure your policy doesn’t exclude tornado damage. Similarly, if you live along the Gulf Coast, it would help to have windstorm coverage for hurricanes.
According to the Triple-I, hazard insurance is included as part of your policy’s dwelling coverage, which typically makes up more than 90% of your homeowners’ premium cost. It is listed as “Coverage A” or “dwelling coverage” on your declaration page. Loss of use, which provides temporary living expenses if you are displaced from your home for a covered peril, and other structures coverage are also included within Coverage A.
The average cost of homeowner’s insurance in the U.S. is $1,383 per year for $250,000 of dwelling coverage, according to rates from Quadrant Information Services. However, the cost will largely vary based on your coverage and limits, as well as what state and ZIP code you live in.
So how much will hazard insurance cost you? There are a few basic factors that will help determine the cost of your premium, including:
- Age and value of your home
- Materials your home is made of
- Type of policy limit you choose
- Policy deductibles you choose
- Whether your home has certain security features
- Location of your home
How much hazard insurance do you need?
You want to make sure you have enough hazard insurance, or dwelling coverage, to rebuild your home. You should also consider purchasing enough personal property coverage to cover all your belongings if your home were to experience a total loss. Luckily, insurance companies have a valuation tool to determine your dwelling coverage amount. For your belongings, it helps to create an inventory to determine your coverage needs.
You’ll also want to make sure your deductible is affordable for your budget. Please note that hurricane windstorm coverage may require a separate deductible, which is typically 1-5% of the insured value of your home.
Who should consider hazard insurance?
All standard homeowners policies include hazard insurance, but this type of coverage may be 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.
Hazard insurance protects homeowners from windstorm losses in states that are at risk of hurricanes, like Florida, Louisiana, Texas, North Carolina and New Jersey. In the Midwestern states, like Oklahoma, Nebraska and Kansas, hazard insurance provides you with financial protection from tornado damage.
Frequently asked questions
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.
Any property insurer that offers homeowners coverage includes hazard insurance. This includes both small and top national home insurance companies. Check around to determine what companies service your state or area and go from there. A local independent insurance agent can help you get multiple quotes to compare coverages and premium costs. You can also use online quoting tools when starting your insurance shopping experience.