Hazard insurance is often used as another term for dwelling coverage, or Coverage A, which is the core component of a standard homeowners insurance policy. It’s the portion that covers damage to the dwelling, or the physical structure of your home.
Mortgage lenders often use the term “hazard insurance” and typically require it when you take out a loan to buy a house. A standard home insurance policy satisfies this requirement because it automatically includes dwelling coverage.
What does hazard insurance cover?
Hazard insurance, or dwelling coverage, protects the structure of your home, including built-in systems like plumbing and electrical and permanently installed items like cabinetry.
If your home is damaged by a covered event, also known as a peril, you can file a claim to help you pay for repairs or rebuilding. Covered perils typically include:
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Fire and smoke
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Wind and hail
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Sudden water damage from inside your home, like a burst pipe
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Lightning strikes, including resulting power surges
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Explosions, such as from a gas leak
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Falling objects like tree branches
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Vehicles or aircraft that crash into your home
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Vandalism or civil unrest
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Weight of ice, sleet, or snow
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Damage from a break-in
Your hazard insurance will come with a coverage limit — the max amount your insurer will pay for a covered loss. You’ll also have a deductible, such as $1,000 or $2,500, which is the portion of a covered loss you’re responsible for. This amount will be subtracted from your claim payment. Coverage limits and deductibles are listed on your policy’s declarations page.
What doesn’t hazard insurance cover?
Hazard insurance has some common exclusions. Though these can also vary by insurer, policy, and state, hazard insurance typically doesn’t cover:
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Flooding
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Earthquakes
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Damage from pests, like termites or rodents
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Mold, rot, and rust
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Sinkholes and landslides
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Intentional damage by a household member
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General wear and tear
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Neglect
If you live in an area prone to natural disasters, you’ll likely need to purchase a separate policy or endorsement (an optional policy add-on that broadens your coverage) to fill critical gaps in coverage, such as flood insurance and earthquake insurance.
While wind damage from hurricanes is typically covered by a standard home insurance policy, your policy may have a separate hurricane deductible if you live in a high-risk coastal area. This deductible applies to hurricane damage instead of your regular deductible and is often a percentage of your dwelling coverage, such as 2% or 5%.
In some areas, wind may be excluded from your policy altogether, in which case you'd need a separate windstorm policy to maintain coverage.
How is hazard insurance different from homeowners insurance?
Hazard insurance, or dwelling coverage, is one part of homeowners insurance. It’s also the part your mortgage lender cares about most.
However, a standard home insurance policy generally covers much more. Here’s how hazard insurance fits in:
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Coverage |
What it covers |
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Dwelling (Coverage A) *This is hazard insurance* |
Damage to the physical structure of your home |
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Damage to other structures on your property, such as fences, sheds, and detached garages |
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Damage to or theft of your belongings, such as furniture, electronics, and clothing |
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Additional living expenses you incur if you must temporarily live outside your home during repairs following a covered loss |
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Financial protection if you’re responsible for property loss or bodily harm to someone else |
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Medical bills for minor injuries to guests on your property, regardless of fault |
Why does your mortgage lender require hazard insurance?
Lenders require hazard insurance to safeguard their investment. If you default on your mortgage, the lender can foreclose on your home and sell it to recoup their initial investment.
However, if your house is destroyed in a fire or storm, and you stop making payments, the mortgage lender won’t be able to sell the home without significant repairs. That’s where your insurance policy comes in.
If there’s a covered loss, the insurance company may issue the claim payment jointly to you and your lender. This helps ensure you use the money to repair or rebuild the home that secures the mortgage.
Expert tip: Paying off your mortgage doesn’t mean you should drop your hazard insurance. According to insurance experts, you should still carry dwelling coverage to protect the investment you’ve made in your home since it’s typically one of the most expensive purchases people ever make.
How do you get hazard insurance?
Generally, you can get hazard insurance from any insurance company authorized to sell home insurance in your state. Follow these steps to find coverage:
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Estimate your home’s replacement cost: Ideally, you should have enough dwelling insurance to cover the cost to rebuild your home based on the cost of labor and materials in your area. To estimate your replacement cost, multiply the square footage of your home by local building costs per square foot. Most insurers will also estimate it for you when you get a home insurance quote.
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Determine your coverage needs: If you have a mortgage on your home, your lender will likely require specific amounts and types of coverage. You may also want to consider risks associated with your location, like weather-related threats.
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Research companies: Explore several companies online. Ask friends, family, and neighbors for recommendations. Compare available coverage types, discounts, and endorsements, and read customer reviews to find the best company for your situation.
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Get quotes: Try to get at least three quotes to compare. Make sure the policy details (coverage types and limits) match across all quotes for an accurate comparison.
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Choose a company, and purchase the policy: You may be able to begin the process online, or you might have to contact an agent by phone. Coordinate with your insurer to send proof of coverage before closing on your home.
Frequently asked questions
Can you just buy hazard insurance?
Hazard insurance, also called dwelling coverage, covers the physical structure of your house. It typically isn’t sold on its own, but comes as part of a standard home insurance policy. However, in some cases (like if you rent out the property as a landlord), you may be able to purchase a dwelling fire policy, such as a DP3, which is closer to standalone hazard insurance.
How much does hazard insurance cost?
The cost of hazard insurance is bundled into your overall home insurance premium. On average, home insurance costs $3,303 a year for $350,000 of dwelling coverage, based on the Consumer Federation of America’s analysis of Quadrant Information Services data. However, this cost can vary widely depending on where you live and the level of coverage you purchase.
Why do you pay hazard insurance through your mortgage?
Your mortgage lender may require you to pay your home insurance premium, which includes hazard insurance, as part of your monthly mortgage payment. These funds go into an escrow account. Your mortgage servicer then uses the funds to pay your home insurance on your behalf, which ensures your coverage stays current while carrying a mortgage balance.
How is hazard insurance different from mortgage insurance?
Hazard insurance and private mortgage insurance (PMI) are both common requirements in mortgage lending, but they work very differently.
Hazard insurance pays to repair your home’s structure after covered damage, which benefits both you and your lender. PMI only protects the lender by covering some of its financial losses if you stop making loan payments. For conventional mortgages, you can usually request to remove PMI after you’ve reached 20% equity in your home, but the lender typically requires you to carry hazard insurance until the loan is completely paid off.
