Is hazard insurance the same as homeowners insurance?

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Hazard insurance is a standard part of a home insurance policy. It’s the part that covers the house itself, and is required by mortgage companies as part of the loan agreement.

A standard home insurance policy comprises coverage for the dwelling, other structures, personal property, additional living expenses and liability. It’s a package policy that combines all of the coverage you need as a homeowner in one. Among those coverages is hazard insurance, which is called dwelling coverage on your policy.

Here’s what you need to know about the differences between hazard insurance and home insurance.

Key Takeaways

Hazard insurance and homeowners insurance aren’t the same, but hazard insurance is part of of a home insurance policy.
Hazard insurance is the portion of your home insurance that covers the dwelling and protects the mortgage company’s investment, which is why it’s require by lenders.
Home insurance is a package policy that covers other things like personal property and other structures, and provides liability coverage, in addition to dwelling coverage.

Is hazard insurance the same as home insurance?

Hazard insurance and home insurance aren’t the same thing, but hazard insurance is part of a standard home insurance policy.

Hazard insurance protects the home and is the dwelling coverage portion of your policy. Hazard insurance only covers damage to the actual structure.

Hazard insurance can’t be purchased separately from a homeowners policy, says Mark Friedlander, director of corporate communications for the Insurance Information Institute.

“Hazard insurance generally refers to damage to the structure of your home by a covered peril,” Friedlander says.

Home insurance includes hazard insurance (dwelling coverage), personal property coverage, other structures coverage, and additional living expenses.

“Other coverages included in a typical homeowners policy – such as loss of use/additional living expenses and no-fault medical payments to others – are not considered a part of hazard insurance, but your homeowners policy will still provide you with these valuable protections,” he says.

Hazard insurance handles covered perils, including fire, vandalism, explosions, theft or weather-related damage to the house. On a standard home insurance policy, coverage is all perils or open perils, which means that anything not specifically excluded is covered.

If a tree falls on your roof, hazard insurance covers the damage to the house. Other portions of your homeowners policy will cover additional expenses, like damage to personal property and additional living expenses if you have to stay in a hotel while repairs are done.

Hazard insurance is subject to a deductible. The higher the deductible, the lower the premium you pay.

Hazard insurance cost varies by the home. Hazard insurance is dwelling coverage, so the size of the structure and cost to replace the structure influences the cost of hazard insurance.

What does hazard insurance cover?

Hazard insurance covers the house itself and any attached structures like a deck, attached garage or porch. In a standard HO-3 home insurance policy, the dwelling is covered for all perils (also called open perils), which means that all damage is covered unless it is specifically excluded.

A summary of your coverages, limits, and deductibles is listed on the declaration page of your homeowners policy (typically the first page of the policy), Friedlander says.

What hazard insurance doesn’t cover

Hazard insurance doesn’t cover every type of damage. Here’s what the hazard insurance portion of a home insurance policy doesn’t typically cover:

Floods
Earthquakes
Personal property inside the structure
Liability insurance

If you want flood damage protection, you must buy a separate flood insurance policy. The same goes for earthquake insurance.

“Earthquake insurance should be considered by homeowners who live in areas prone to earthquakes, such as the West Coast and several Midwestern states. Earthquake insurance may be available through your home insurer as an endorsement to your standard home policy or purchased separately through specialty insurers, such as the California Earthquake Authority. Your insurance agent can help you shop for coverage,” Freidlander says.

However, personal property coverage is part of a standard home policy. The same goes for liability coverage.

Named peril policy vs. open peril policy

The difference between a named peril policy and an open peril policy can mean the difference between whether your home policy covers damage.

Named peril policies include coverage only for the perils listed as covered. So, these policies are more limited than an open peril policy.

Open peril policies cover events that aren’t named, as long as they aren’t listed as an exclusion. A standard home insurance policy is open perils for the dwelling, so your hazard insurance is open perils.

“A named perils policy provides coverage only for those perils listed, or specifically ‘named,’ in the policy. An open perils policy provides protection to you for any reason not specifically excluded in the policy. Standard homeowners policies typically list the perils that are covered – thus, they are ‘named perils,’” says Freidlander.

Named peril policy

Here’s what is usually covered in a named peril policy:

Fire and smoke
Lightning
Hail
Windstorms
Explosions
Theft
Vandalism
Falling objects
Damage caused by the weight of snow, sleet or ice
Freezing of household items like your HVAC systems (AC/furnace)
Water damage caused by a household appliance or burst pipe
Power surges
Riots and civil commotion
Damage from vehicles
Damage from aircraft
Volcanic eruption

Open peril policy

Open peril policies cover anything that is not excluded. So, if there is no exclusion listed in the policy for that peril, it will be covered.

QuickTake

What is dwelling coverage and how much do you need?

Frequently Asked Questions

What’s the difference between actual cash value and replacement cash value?

Both terms refer to how your insurance policy reimburses for covered losses. Actual cash value takes into account depreciation. Replacement cash value does not.

So, you get a larger payout when you file a claim for items if you have replacement value coverage. However, that also comes at a higher cost than actual cash value.

Is flood insurance part of hazard insurance?

Flood insurance isn’t covered by home insurance or hazard insurance.

A separate flood insurance policy can be purchased to cover damage done by floods to a building or property, and sometimes both. Homes in a flood zone may be required to have flood insurance, especially if you have a mortgage.

“There are two important coverages not included in standard homeowners policies that should be strongly considered by those seeking coverage — flood insurance and earthquake insurance. These require separate policies or endorsements depending upon your insurer,” says Freidlander.