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Hazard insurance

Updated Aug 07, 2023

Key takeaways

  • Hazard insurance may also be referred to as dwelling coverage; it is a key part of any standard home insurance policy and provides financial protection for you should your home or belongings be damaged by a covered peril.
  • Although coverage may vary based on your insurance carrier and policy, hazard insurance typically covers 16 named perils and excludes coverage for floods and earthquakes.
  • The national average cost of homeowner’s insurance is $1,428 annually for $250,000 in dwelling coverage, but factors like the age, location and and cost to rebuild your home will impact your premium.

Hazard and home insurance are sometimes used interchangeably, but they are not the same. Rather, hazard insurance is actually the portion of your home insurance that financially protects you against damage to your home and personal items as a result of named hazards (or perils) covered by your policy. Hazard insurance isn’t legally required, but if you have a mortgage on your home, chances are your lender may require you to have hazard insurance. Bankrate’s insurance editorial team breaks down what hazard insurance is and how it works so you can better understand it when you are shopping for home insurance.

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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. Other structures may be referred to as things 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 the hazards (better known as perils in the insurance world) mentioned above that could 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 (although it is worth noting that hurricane coverage comes with a separate, larger deductible in states that are prone to those storms and that flooding caused by hurricanes is not covered in a home insurance 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, a severe windstorm or an explosion. This could 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
  • 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

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 average cost of homeowner’s insurance in the U.S. is $1,428 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. 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 ensure you have adequate windstorm coverage for hurricanes. 

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.

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. Even though a higher deductible can lower your premium, this amount will be due up front in the event of a covered loss.

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. Homeowners in states that face a high risk of natural disasters are more likely to file a hazard insurance claim. But that also means that some of the hazards that are common in your area may be restricted or excluded from standard policies since the risk of payout is much higher for the insurance company.

It is important to note which types of hazards are specifically excluded, especially if you live in a state prone to these disasters. If you live in a state prone to an earthquake or a flood, for example, you will want to either purchase a supplemental policy for coverage or ask your insurer if there is a policy endorsement for that type of disaster.

Frequently asked questions

Written by
Joshua Cox-Steib
Contributor, Personal Finance

Joshua Cox-Steib has two years of experience in writing for insurance domains such as Bankrate, Coverage.com, The Simple Dollar, Reviews.com, and more. His work has also been featured on such sites as MSN and BBB (Better Business Bureau). His insurance writing career has spanned across multiple product lines, with a primary focus on auto insurance, life insurance, and home insurance.

Edited by Editor, Insurance
Reviewed by Director of corporate communications, Insurance Information Institute