Hazard Insurance

Thomas Barwick/Getty Images

The world of homeowners insurance comes with a lot of different terms and phrases – and very common one is “hazard insurance.” If you are closing on a mortgage loan, your lender is going to require that you have hazard insurance to protect your home (and their investment). The good news is this essential coverage is typically included in a standard homeowners policy.

Hazard insurance protects your home from specific perils (or hazards) such as fire, lightning strikes, windstorms and hail, according to the Insurance Information Institute (Triple-I). But while hazard insurance covers structural damage from many natural disasters, it won’t cover losses from every peril that you may incur, such as earthquakes and floods, meaning that you may want to consider a more comprehensive homeowners insurance policy or buy additional coverages.

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, 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.”

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 or personal belongings. 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 replacing the cost of your entire home and possessions if a severe windstorm or an explosion caused catastrophic damage. 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
  • 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 short answer is that it depends. You need to shop around for homeowners insurance that includes hazard coverage tailored to your needs. Your policy won’t be useful if it excludes tornado damage and you’re in “Tornado Alley,” nor will it be helpful if you live along the Gulf Coast and don’t 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. was $1,312 per year, based on $250,000 of dwelling coverage. However, the cost will largely vary based on your coverage and limits, as well as what state 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

The first step is to determine how much coverage you need to be financially protected from hazards and then shop around for the best price and coverage. When deciding on your policy, it helps to first get a sense of the natural hazards in your area. For example, Midwestern homeowners need coverage for severe thunderstorms and blizzards, while those along the Atlantic and Gulf coasts need to be protected from the catastrophic winds of hurricanes.

You’ll also want to 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. Please note that hurricane windstorm coverage requires a separate deductible, which is typically 1-5% of the insured value of your home.

Who should get 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.

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 to ensure you are financially protected from a catastrophic loss. The insured value should take into account the cost of your home, its current market value and the cost to replace the contents of your home. Your insurance agent can help you determine how much coverage you need.

Companies that offer hazard insurance

Any property insurer that offers homeowners coverage includes hazard insurance. This includes national and regional 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. Your local 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.