What Is Hazard Insurance for a Home?
- Hazard insurance, also known as “dwelling coverage,” covers the structure of your home.
- You need enough hazard insurance to pay for a complete rebuild of your home if it’s destroyed.
- Mortgage lenders often require you to carry hazard insurance.
How does hazard insurance work?
Hazard insurance is the part of your home insurance that protects your house from damage caused by covered perils A covered peril is an event — like fire, lightning or vandalism — that your home insurance may cover if it causes damage to your home or property. like fire, storms or theft. If one of these events damages or destroys your home, hazard insurance helps pay to repair or rebuild it.
You’ll usually pay for the first year of hazard insurance as part of your closing costs when you buy your home.
After that, if you have an escrow account, your monthly mortgage bill will include your hazard insurance payment. If you don’t have an escrow account, you pay your insurance company directly.
If you need to file a hazard insurance claim, you must first pay your deductible A deductible is the amount of money you pay out of your own pocket after you file a claim and before your insurance company pays the rest. . Your insurance company then covers the rest of the costs.
Hazard insurance vs. Homeowners insurance
Hazard insurance, often called “dwelling coverage,” is one part of your home insurance policy. It protects the structure of your home.
Your home insurance policy also includes other types of coverage, such as:
- Personal property: Protects your belongings, like furniture, clothes and electronics.
- Liability: Pays medical bills if someone gets hurt on your property. It also pays if you damage someone else’s property.
- Loss of use: Covers extra costs, like hotel stays or meals, if you have to move out while your home is fixed or rebuilt after a covered loss.
- Medical payments: Helps pay small medical bills if a guest gets hurt on your property, no matter who was at fault for the injury.
What does hazard insurance cover?
Hazard insurance covers your house from damages that can include:
- Fire and smoke
- Lightning
- Hail
- Freezing
- Damage caused by the weight of ice, sleet or snow
- Wind
- Water damage from household appliances or a burst pipe
- Falling objects
- Power surges
- Explosions
- Theft
- Vandalism
- Vehicle collision
- Aircraft
- Civil unrest or riot
Home insurance policies come in two types: “all-peril” and “listed peril.” An all-peril policy covers every risk unless your policy specifically excludes it in writing. A listed peril policy only covers the risks named in your policy.
What doesn’t hazard insurance cover?
Hazard insurance does not cover certain risks, including:
- Earthquakes
- Floods
- Intentional damage
- Mold
- Normal wear and tear
- Pests
- War
If you have a mortgage, your lender may require you to buy earthquake insurance or flood insurance, depending on where your home is located. Many home insurance companies offer both as add-on policies.
Is hazard insurance required?
Hazard insurance isn’t required by law, but mortgage lenders require it if you have a mortgage to protect their investment.
Even if your home is paid off, hazard insurance can save you thousands in rebuilding costs. According to the Insurance Information Institute, the average home insurance claim is $17,059, while the average annual premium is $2,801. That’s a lot of protection for a relatively low price.
How much is hazard insurance?
The cost of hazard insurance depends on your coverage amount. Higher coverage means a higher premium Your premium is the amount of money you pay regularly, usually monthly or yearly, to an insurance company for a policy. . For example, the average rate for $400,000 of coverage is $303 per year more than for $350,000 of coverage.
Annual home insurance rate by hazard insurance limit
| Hazard insurance limit | Annual rate |
|---|---|
| $350,000 | $2,498 |
| $400,000 | $2,801 |
| $450,000 | $3,111 |
Several factors impact your hazard insurance rate, including:
- Your ZIP code
- The age of your home
- The construction materials used
- Your insurance history
How do I get hazard insurance?
To get hazard insurance, compare home insurance quotes from several different companies. Each insurance company weighs risk factors differently. One may see the age of your home as a bigger risk and raise your rate because of it, for example. Comparing quotes helps you find the best balance of cost and coverage.
Frequently asked questions
The hazard insurance on your mortgage protects the structure of your home from covered risks like fire, lightning or vandalism.
Hazard insurance isn’t required by law. But most mortgage lenders will make you buy a homeowners insurance policy, which includes hazard coverage.
After you file a hazard insurance claim, an adjuster will inspect the damage. If the claim is approved, your insurer will send payment either to you or directly to the contractor handling the repairs.
You should carry enough hazard insurance to pay for a full rebuild of your home if it’s completely destroyed.
Methodology
The rates shown in this article are based on non-binding quotes collected from Quadrant Information Services. Your rates may vary. Average rates were compiled from rates in all 50 states. The following coverages and deductible were used unless otherwise noted:
- $400,000 dwelling coverage
- $40,000 other structures
- $200,000 personal property
- $80,000 loss of use coverage
- $100,000 liability
- $5,000 medical payments
- $1,000 deductible