What is hazard insurance?
The term “hazard insurance” is usually used to describe the part of your homeowners insurance that pays for structural repairs if your home is damaged by a covered peril. So technically, your dwelling coverage, also called Coverage A, is hazard insurance.
Most homeowners policies have hazard insurance plus additional protections, like:
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Coverage B that protects other structures on your property.
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Coverage C for your personal property up to a certain limit.
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Coverage D that reimburses you if you lose the use of your home in the event of serious damage.
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Coverage E to protect you against personal liability resulting from accidents on your property, such as a dog biting a guest.
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Coverage F to help with medical payments for people injured on your property.
Lenders use the term hazard insurance a lot, so you’ll probably come across it when finalizing your loan documents and closing on a house. You’ll be required to show your homeowners insurance has the appropriate hazard insurance to protect the property.
We should clarify here that the word “hazard” has multiple meanings in the world of insurance. While hazard insurance protects against specifically covered perils, “hazard” can also describe a condition that increases your chances of experiencing a loss. For example, having a chimney that hasn’t been cleaned in years is a hazard because it increases the likelihood of a chimney fire.
Hazard insurance vs homeowners insurance
If you took on a mortgage loan to buy your home, chances are your lender required you to carry “hazard insurance.” If you already have homeowners insurance, rest assured: hazard insurance is almost certainly included. Either way, here’s a breakdown of what home hazard insurance is and why you need to have it.
What does hazard insurance cover?
There are many perils (or hazards) that hazard insurance may cover, including:
Read through your home insurance policy for the full list of perils that are covered by your hazard insurance.
What doesn’t hazard insurance cover?
Hazard insurance in a homeowners policy generally doesn’t cover damage caused by flooding or storm surge from a hurricane. Earth movement, like earthquakes, landslides, and sinkholes, are also common exclusions. Homeowners often need a separate policy or an insurance endorsement to cover these hazards.
Additionally, hazard insurance typically only refers to dwelling coverage. Personal property and other structure coverages often protect against a similar list of perils, but aren’t usually described as hazard insurance.
How hazard insurance works
Your hazard insurance works the same way the rest of your homeowners insurance policy works. If your home suffers damage from a covered peril, your hazard insurance kicks in to pay for covered damages, up to the policy limits. Other parts of your policy may kick in as well, such as loss of use and personal property coverage. You don’t need to do anything different to have the hazard insurance cover the claim.
When you file a claim on your homeowners insurance, a claims representative reviews your insurance coverage and sets up the time for the claims adjuster to assess the damage. Once the adjuster approves the claim, your claims representative processes it and issues a check so repairs can begin.
Why do homeowners need hazard insurance?
Hazard insurance is specifically required by mortgage companies. Lenders want homeowners to have coverage on the house so it can be repaired if there’s a significant loss.
Imagine if there’s a fire that makes your home uninhabitable. The lender has a vested interest in the house being repaired, but you may have little incentive to pay your mortgage. You could choose to walk away and file bankruptcy. Requiring hazard insurance protects the lender’s investment.
How much does hazard insurance cost?
Because hazard insurance is part homeowners insurance, costs vary depending on your home’s:
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Location
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Size
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Building materials
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Other factors
Your credit and claims history may also play a role in determining your rate. The most recent data from the Insurance Information Institute puts the national average for homeowners insurance at $1,311 per year, but that can vary a lot by state and carrier.
If you're looking for home insurance to meet your lender's hazard insurance requirement, get a quote form us today! On average, homeowners who switch to Kin save nearly $1,000 per year.*
The bottom line
The bottom line about hazard insurance is that you don’t have to shop for it separately from your regular homeowners insurance. It’s standard practice for insurance companies to include it in homeowners policies. After all, it wouldn’t be much of a policy if it didn’t protect the home itself.
In some policies, you’ll see hazard insurance referred to as dwelling coverage. But no matter the name, the coverage offers the same protection for the physical structure of your house.
*Customers who switched to Kin report annual savings of $9r5 on average. Based on Kin Customer Savings Survey conducted October 2022 - October 2023. Potential savings may vary.
