Hazard Insurance: What It Is and How It Works
Hazard insurance represents the portion of your homeowners insurance policy that helps pay to rebuild or repair your home after damage from a covered peril.
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Sarah SharkeyInsurance Writer
7+ years writing insurance and personal finance content
Contributor to top media, including USA Today
A passionate personal finance advocate, Sarah’s writing has graced the pages of many of the personal finance and insurance industries’ top web publications.
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Edited bySara Getman
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Sara GetmanAssociate Editor
Sara Getman is an Associate Editor at Insurify and has been with the company since 2022. Prior to joining Insurify, Sara completed her undergraduate degree in English Literature at Simmons University in Boston. At Simmons, she was the Editor-in-Chief for Sidelines Magazine (a literary and art publication), and wrote creative non-fiction.
Outside of work, Sara is an avid reader, and loves rock climbing, yoga, and crocheting.
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Table of contents
Hazard insurance pays to repair or rebuild the structure of your home after damage from a covered peril, like a fire or hail.
If you have a mortgage on your home, your mortgage lender will likely require you to carry hazard insurance. Fortunately, it’s part of a standard homeowners insurance policy, so you don’t need to shop for it separately.
Here’s what you need to know about hazard insurance.
What is hazard insurance?
Hazard insurance coverage represents a portion of your homeowners insurance policy. Within your home insurance policy, hazard insurance encompasses the dwelling portion of your policy, and it offers coverage for damage and losses from covered perils and hazards.
For example, after a fire, the hazard insurance portion of your home insurance policy would kick in to help you pay for repairs.[1]
Your home insurance includes many different coverages, but your mortgage lender is only concerned with coverage for your home’s structure. This is why you may hear them refer to home insurance and hazard insurance interchangeably.
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Common home insurance perils
Although the details of your home insurance policy may vary, common home insurance covered perils include:
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What hazard insurance covers
Hazard insurance generally covers losses and damages to the structure of your home. The details of your coverage will vary from policy to policy. But the following perils are typically covered under the hazard portion of your home insurance policy:
Fire and smoke
Wind and hail
Lightning
Explosions
Damage from vehicles or aircraft
If one of these covered perils causes damage to your home’s structure, your insurer may help you pay for repairs or rebuilding costs.
In general, you’ll have to pay your deductible before your insurance kicks in. Additionally, most policies come with a coverage limit, and any costs above that limit won’t be covered.
The table below highlights several perils and potential coverage outcomes.[2]
Hazard/Peril  | Examples of Damage | Covered by Hazard Insurance? |
|---|---|---|
| Fire or smoke | Kitchen fire damages walls, roof, and framing | Yes |
| Aircraft debris | Structural damage from a falling object | Yes |
| Vandalism | Spray-painted walls | Yes |
| Vehicle | Structural damage after a vehicle runs into a home | Yes |
| Natural disasters that include thunderstorms, windstorms, hail, and sleet | Structural damage, roof damage, wind damage | Yes |
| Flooding | Water damage | No |
| Earthquake | Structural damage | No |
What hazard insurance doesn’t cover
Hazard insurance covers many risks, but it doesn’t cover every possible threat. These are a few common exclusions in a hazard insurance policy:
Flood damage
Earthquakes
Sinkholes
Sewer backup
Normal wear and tear
Maintenance-related issues
For example, if a natural disaster floods your home, hazard insurance won’t cover it. You’d need to have an additional flood insurance policy.
Additionally, hazard insurance doesn’t cover damage that accumulates over time, like through gradual wear and tear. And while most policies include fire damage, some policies might exclude wildfire damage coverage for homes in high-risk areas.
If you’re concerned about a particular risk that regular hazard insurance doesn’t cover, you can purchase a separate policy or a policy endorsement. For example, many homeowners choose to purchase separate flood insurance and earthquake insurance policies.
Hazard insurance vs. homeowners insurance
Hazard insurance represents one part of homeowners insurance. But homeowners insurance goes beyond hazard insurance to offer several other protections.
The table below highlights the differences between hazard insurance and homeowners insurance.[3]
Coverage | Hazard Insurance | Homeowners Insurance |
|---|---|---|
| Rebuilding costs after covered peril | Yes | Yes |
| Liability coverage | No | Yes |
| Personal property coverage | No | Yes |
| Loss of use coverage (which may cover living expenses) | No | Yes |
Why mortgage lenders require hazard insurance
When buying a house with a mortgage, you might be surprised to discover that mortgage lenders often require borrowers to carry hazard insurance. Lenders require this coverage as a way of protecting their investment in the underlying asset: your house.
If something were to happen to your home and you couldn’t afford to rebuild it, the value of the home would decrease. Since the home serves as collateral for the mortgage, this could put the lender in a losing financial position if you fell behind on mortgage payments.
The lender’s strong interest in protecting the home’s value means most require borrowers to carry a minimum amount of hazard insurance. But notably, the lender’s requirements typically only cover the physical structure, not any of your personal belongings.[4]
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How much hazard insurance do you need?
When deciding how much hazard insurance you need, the exact amount will vary based on your situation. For starters, you’ll need to carry at least what your mortgage lender requires. Although a lender’s minimum requirements likely aren’t robust enough, it’s a good place to start.
But beyond the level of coverage you’re required to carry, it’s a good idea to consider the worst-case scenario when getting coverage. You’ll likely need enough coverage to pay for rebuilding your home after a covered peril totally destroys it.
Notably, the market value likely won’t match up exactly with the replacement cost. In order to get a more accurate price on rebuilding your home, consider calling a local contractor for an estimated building price per square foot, which you can multiply by your home’s square footage to get an approximate rebuilding price.[5]
Hazard insurance FAQs
Hazard coverage is part of a standard home insurance policy, and it’s important to fully understand what it covers. Here are some answers to frequently asked questions about hazard insurance.
Not exactly. Hazard insurance is included as a standard part of your homeowners insurance policy. Although these aren’t exactly the same thing, sometimes the terms are used interchangeably.
No, hazard insurance doesn’t cover floods. If you want flood protection, you’ll need to purchase a separate flood insurance policy.
If you don’t have a mortgage, you won’t be required to carry hazard insurance. But for most homeowners, it’s still a good idea to carry this coverage. Without it, you’d be fully responsible for any rebuilding costs following a covered event, which could be financially devastating.
No, hazard insurance isn’t required by law for homeowners. But most mortgage lenders require borrowers to carry at least a minimum amount of hazard insurance.
No. Hazard insurance is part of a standard homeowners insurance policy, and you can’t buy hazard coverage on its own.
Hazard insurance might cover accidental water damage, like damage from a burst pipe. But it’s worth asking your insurer to be sure.
Yes, hazard insurance is included as a part of your standard homeowners insurance costs.
Yes, mortgage lenders can purchase insurance for your home if you don’t. But this force-placed insurance may be more expensive and may only cover the lender.
Methodology
Insurify data scientists analyzed rates from more than 180 home insurance companies sourced directly from Insurify’s partner companies and Quadrant Information Services. Rates span all 50 states and Washington, D.C., and quote averages represent the mean price for a given coverage level and geographic area. To ensure data reliability, only insurers meeting minimum quote thresholds were included in the analysis.
Unless otherwise specified, quoted rates reflect the average cost for homeowners with no prior claims and good credit with a home construction year of 1980. The default coverage assumptions include:
Default Coverage Assumptions
- Dwelling coverage: $300,000
- Deductible: $1,000
- Personal property limit: $25,000
- Liability limit: $300,000
Additional data points beyond these default values are sourced from Insurify’s proprietary database. Rates are updated monthly.
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Sources
- Cornell Law School. "Hazard Insurance."
- III. "Which disasters are covered by homeowners insurance?."
- III. "Homeowners Insurance Basics."
- III. "Can I own a home without homeowners insurance?."
- III. "How much homeowners insurance do I need?."
)
Sarah SharkeyInsurance Writer
7+ years writing insurance and personal finance content
Contributor to top media, including USA Today
A passionate personal finance advocate, Sarah’s writing has graced the pages of many of the personal finance and insurance industries’ top web publications.
Featured in
A passionate personal finance advocate, Sarah’s writing has graced the pages of many of the personal finance and insurance industries’ top web publications.
Sara GetmanAssociate Editor
Sara Getman is an Associate Editor at Insurify and has been with the company since 2022. Prior to joining Insurify, Sara completed her undergraduate degree in English Literature at Simmons University in Boston. At Simmons, she was the Editor-in-Chief for Sidelines Magazine (a literary and art publication), and wrote creative non-fiction.
Outside of work, Sara is an avid reader, and loves rock climbing, yoga, and crocheting.