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Is Hazard Insurance the Same as Home Insurance?

Updated Dec 15, 2022

Updated Dec 15, 2022

Home > Home Insurance > Is Hazard Insurance the Same as Home Insurance?

Hazard insurance and home insurance are different types of insurance. However, they can be used interchangeably in legal documents, like contracts from your mortgage company, making the differences less than clear. 

Hazard insurance is a type of coverage that falls under the umbrella term of homeowners insurance, so it’s hard to compare these two directly. Therefore, we’ll cover the differences between hazard insurance and home insurance coverage and everything you need to know about them. 

What Is Home Insurance?

Home insurance is a bundle of insurance coverage that protects different parts of your home from costs that may occur suddenly and unexpectedly, such as natural disaster damage, medical payments for an injured guest, vandalism, or theft. 

Here are the top types of homeowners insurance coverage

  • Dwelling coverage: Dwelling or structure coverage covers everything that is part of the physical home, such as the walls, foundation, roof, and windows. This type of coverage excludes personal property but protects you if your actual house is damaged during a sudden, covered event, also known as a named peril. This coverage may include damage from house fires, windstorms, hurricanes, tornadoes, and more. 
  • Other structures coverage: Other structures coverage protects you if detached structures on your property, such as sheds, fences, or detached garages, are damaged in a covered peril. 
  • Loss of use coverage: This type of coverage helps with the costs of living elsewhere if you’re forced to live in a rental or hotel after a covered peril damages your home. 
  • Personal property coverage: This part of your home insurance policy covers stolen, lost, or damaged personal property after a covered peril up to the coverage limits. Personal property coverage may also be referred to as replacement cost insurance. 
  • Medical payments coverage: If someone is injured on your property, this type of liability coverage will pay for related medical expenses. Please note that this doesn’t include residents on the property, only guests and visitors. 
  • Personal liability coverage: If you’re sued after someone is hurt at your home, personal liability coverage will cover the court expenses and legal fees up to the policy limits. 

What Is Hazard Insurance?

Hazard insurance is not a separate type of insurance but a part of homeowners insurance. However, you should never assume your homeowners insurance covers these perils. Always check with your insurance company and insurance agent about what is and isn’t covered under your homeowners insurance

Homeowners insurance or hazard insurance are typically required by a mortgage company or financial institution lending you money for your home. This requirement protects the company’s financial investment in your home. If your mortgage company only requires hazard insurance, then you only need coverage for the structure of your home. However, it’s still a smart choice for most homeowners to get a complete home insurance policy to protect everything on the property.  

What Is the Difference Between Hazard Insurance and Home Insurance?

In short, the primary difference between hazard insurance and home insurance is that hazard insurance is a type of homeowners insurance that covers the home’s structure. 

Homeowners insurance coverage is comprehensive coverage that covers more parts of the home, including other structures on the property, the land, and your personal belongings. Hazard coverage will only cover the structure of your home when incidents like fire or theft damage it. Hazard insurance won’t cover personal liability claims, legal fees, damage to your yard or shed, the loss of personal property, or medical expenses. 

For example, if someone breaks into your home and smashes the walls, the insurance provider would cover repairs for the walls under both hazard and home insurance. However, only home insurance would cover legal fees, the replacement cost for your personal belongings, and medical costs to guests on your property if an intruder harmed them during the burglary. 

Why Do I Need Hazard Insurance or Homeowners Insurance?

On average, property damage claim payouts were nearly $14,000 between 2016 and 2020, and 6% of all insured homes in 2020 filed a claim. While 6% may not be a significant amount, the amount of money you’ll save if your claim is approved is likely substantial and more than many of us have in an emergency fund for our homes. As a result, homeowners insurance or hazard insurance is a critical necessity for financial peace of mind. 

We also recommend considering flood insurance or earthquake insurance as additional coverage. Most home insurance policies have exclusions for water damage from flooding or earthquake damage, so it’s prudent to look into added coverage for these items if you live in an area prone to earthquakes or flooding.

In addition, nearly all mortgage lenders and real estate agents will require you to have a homeowners or hazard insurance policy. If you don’t, they may refuse to finance you, or they may buy it for you and charge you a fee. In the latter case, your lender must give you advanced notice. 

Lender-purchased homeowners insurance often has more expensive insurance premiums. If you fail to keep up with your insurance policy, your credit score may take a significant hit, and the lender may purchase a policy in your place. However, the policy may only cover the lender and not your belongings or personal liability. 

On both accounts, it’s wise for homeowners to have hazard or homeowners insurance products to protect their finances and get approved for a mortgage. 

Final Thoughts

A standard homeowners insurance policy plus added coverage for earthquakes or floods if you live in a high-risk area is universally regarded as an intelligent investment for homeowners. Without it, you’re in a risky financial situation where you could lose your entire home and personal belongings or jeopardize your finances if you’re sued or need to pay for an injured guest’s medical bills. Gather several home insurance quotes before deciding on an insurance policy, and don’t hesitate to shop around until you find a better cost of hazard insurance or home insurance. 

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