Searching for the right homeowners insurance policy can be confusing. There is insurance-specific terminology to master, for example. One phrase you may hear when you are talking to insurance agents is “hazard insurance.” You may be told that you have a certain amount of hazard insurance on your policy. But what does this mean and is hazard insurance the same thing as homeowners insurance? Not exactly, but the distinction is easy to make once you understand it. Bankrate’s insurance editorial team digs into hazard insurance to help you understand how it fits into your homeowners insurance policy.


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Is homeowners insurance the same as hazard insurance?

No, hazard insurance is not the same thing as homeowners insurance, but it is part of your homeowners insurance policy. To put it simply, hazard insurance is not a separate policy you need to purchase; it is one part of an average homeowners insurance policy. It plays a role in your homeowners insurance, but it’s not an interchangeable term with homeowners insurance.

Simply put, hazard insurance is the same thing as dwelling coverage. Dwelling insurance is the part of your policy that covers your actual house—from roof to foundation—but not the contents of your home or other structures. It is often called hazard insurance because the average homeowners policy includes coverage for a list of perils, or hazards, that can damage or destroy your home.

Homeowners insurance

Let’s zoom out and look at what a full standard homeowners insurance policy covers. Homeowners insurance consists of a collection of coverage types that insure different aspects of your home. In addition to dwelling coverage, your homeowners insurance could cover detached structures, like a detached garage, your personal property and liability if someone is injured on your property. Common coverage types that are included in standard homeowners insurance policies include:

  • Dwelling coverage: Dwelling coverage, or hazard insurance, covers repair or replacement for your actual home—meaning its foundation, roof, walls and windows. Also called hazard insurance.
  • Personal property coverage: Covers lost, damaged, or stolen personal property you have in your home (or even in your car) if the cause of loss is a covered peril.
  • Other structures coverage: Do you have detached structures on your property? The other structures portion of your policy protects unattached things like a shed, greenhouse or fence.
  • Loss of use coverage: If you are forced to live somewhere else after a covered peril, loss of use coverage will cover your additional living expenses up to a certain limit.
  • Medical payments coverage: If a guest is injured at your home after a covered peril, this coverage could pay their medical expenses up to predetermined limits.
  • Personal liability coverage: If you are sued because someone is injured at your home, personal liability coverage could cover your court expenses up to policy limits.

As you can see from this list, hazard insurance is only one component among a handful of coverages that protect your finances against damage to different elements of your home and property in different ways.

Hazard insurance

So what does dwelling or hazard insurance cover? That depends on the type of policy you have. Hazard insurance protects against either named perils or open perils, depending on the type of policy. Let’s look at what that means.

A named perils policy protects your home against 16 specific home insurance perils. “Perils” is just another word to indicate the types of disaster or mishap that can happen to damage your home, like fire or flooding.

Those named perils include explosions, falling aircraft/objects, fire, hail and a handful of others. If your policy is based on named perils, any peril not listed on your policy is not covered in your policy.

An open peril policy, which is less common, protects against just about any peril you can think of, except for any exclusions that are named in the policy. Common exclusions include perils such as collapse of internal structures, discharge of pollutants, earth movement and others.

Though it may seem like an open perils policy has more exclusions than inclusions, it actually protects against far more items than a named policy. It is for this reason that an open perils policy typically costs more.

There are eight types of homeowners insurance policies offered by most providers to choose from, and each either has a named perils approach or an open perils approach.

But then it gets a little more complicated, because HO-3 policies, the most common type, use the open perils structure for covering your dwelling (that’s your hazard insurance), but a named perils approach for the contents of your home (that’s the personal property coverage portion of your policy). So if you have an HO-3 policy, which is likely, your insurance covers you for slightly different perils depending on whether it’s covering your dwelling or your personal property.

To sum up, hazard insurance refers to insurance that directly covers you financially if your home’s structure is damaged by covered perils, or hazards. It does not cover liability or medical costs, nor does it cover any damage that might occur to other structures on your property, such as a shed or detached garage.

Frequently asked questions

    • Based on Bankrate’s extensive research and analysis, there are a handful of insurers writing the best homeowners insurance in the U.S. Keep in mind that costs vary depending on a number of factors, from where you live to what your credit rating is. Every company assesses these differently, so it can pay to gather quotes from several of our chosen companies to see who offers you the best rate.
    • The average price of a homeowners insurance policy with $250,000 in dwelling coverage is $1,428. Your own rate is likely to vary from this, since every premium is unique and tailored to the circumstances of each homeowner’s needs and the nature and location of their property. Most insurers offer free quotes, so it is simple to find out what your own rate would be by looking online or calling an agent.
    • The most effective way to save on your home insurance is to shop around and compare quotes for the same types and levels of coverage. One way is to ensure that you are earning all the discounts for which you are eligible. Almost every insurer has at least a small handful of discounts that can lower the cost of your policy. Another way you can save on your premium is by increasing your deductible—but remember that you will have to pay that amount before your policy kicks in after a claim, so avoid raising it to a level you would have difficulty paying.