What is Hazard Insurance? Is it the Same as Homeowners Insurance?

Has your mortgage told you you need hazard insurance? Or have you heard someone use the term?

If you’ve heard the term hazard insurance, there’s a chance you had a mini freakout thinking: “Hazard insurance? What is hazard insurance? I don’t have that, but it sounds like something I need!”

Perhaps that mini freakout even brought you to this article.

But don’t worry, we get that a lot at Berry Insurance. If hazard insurance is an unfamiliar term for you, you probably have a lot of questions. But the truth is, you probably are already covered by “hazard insurance” under your homeowners insurance. 

Below, we’ll define hazard insurance, outline what it covers, and explain how it varies from standard homeowners insurance.

What is hazard insurance?

Simply put, hazard insurance is insurance covering physical damage to your home or property caused by covered perils, or “hazards.”

We know what you’re thinking: I thought all of that is covered by my homeowner’s insurance?

Well yes, you’re exactly right. That’s because hazard insurance isn’t an actual specific insurance coverage, rather it is a term for causes of physical damage or loss covered.

In other words, hazard insurance isn’t exactly the same thing as homeowners insurance, but all the coverages of hazard insurance are included within homeowners insurance.

So before we get into exactly what hazard insurance is, it is important for you to understand the sections of a homeowners insurance policy, and which apply to hazard insurance.

Sections of a home insurance policy:

When thinking of homeowners insurance, most people primarily think of the physical damage portion, but there actually quite a bit beyond physical property damage involved in a home insurance policy. That’s why the term “hazard insurance” exists: to differentiate physical damage from unrelated portions of your coverage. We’ll briefly outline all sections of a home insurance policy below -- some of these apply to hazard insurance, while others don’t.

Dwelling: Dwelling covers the actual structure of your home if it is damaged from a number of causes.  

Other structures: This section of a home insurance policy covers damage to structures in your yard, but not attached to your house, such as fences, garages, sheds, pools, and driveways.

Personal property: Personal property insurance includes all of the “stuff” you own in your home or yard. If your property is damaged or stolen, this section of the policy pays to repair or replace it, subject to your deductible.

Loss of use: If a home disaster prevents you from being able to stay in your home while it is being repaired, your homeowners insurance will pay for temporary lodging for you and your family through the loss of use section.

Medical payments to others: This section covers emergency medical expenses to a person who is injured on your property from a fall, laceration, a dog bite, or more.

Personal liability: If someone is injured on your property and sues you for liability, this section covers medical expenses and any legal fees/settlements.

Personal injury (optional): Though not automatically included on a homeowners insurance policy, if you elect personal injury coverage, it would cover libel, slander, or defamation lawsuits.

Which apply to hazard insurance?

Of the sections above, dwelling, other structures, and personal property apply to hazard insurance. That is because the “hazards” (which we will list below) can cause direct physical damage or loss to your home, the structures in your yard, and your personal property.

We understand that you can also argue loss of use, medical payments and personal liability can also come into effect as a result of certain hazards, but not through a direct cause, like in the other three coverages.

For example a storm (a covered hazard) could damage your home and you may need to use loss of use insurance to stay in a hotel while it is being fixed. However, if the storm hadn’t damaged your home, resulting in the need for dwelling/other/structures/personal property coverage in the first place, then you wouldn’t need to use loss of use coverage. 

Again, hazard insurance refers to covered hazards directly damaging property.

So what are those hazards? Let’s get into it.

Covered causes of damage or loss (hazard insurance):

Under your homeowners insurance, your homeowners insurance is covered from many hazards. This is what hazard insurance actually is. Of course, each of these situations are subject to limitations and exclusions on your home insurance policy, and subject to your deductible and review by an adjuster.

Storm damage: Damages caused by most types of storms, such as rain, wind, hail, hurricanes, tornadoes and blizzards are covered by home insurance. However, it has to result from a sudden cause, not gradual damage. For example, rain damage from a hole in your ceiling after a tree falls through it would be covered. Rain damage from a gradual leak you could have sealed up months ago would not be. Flood damage caused by rain is also not covered.

Theft: If someone steals your property (either inside or outside) your insurance will pay you to replace it after you file a police report.

Fire damage: If a fire damages your home or possessions, home insurance will cover the cost. 

Sudden or Accidental Discharge: Homeowners insurance covers damage from sudden water discharge, such as from a burst pipe, water heater rupture, or washing machine or dishwasher failure. However, while the policy covers the damage, it will not pay to replace the faulty water heater, washing machine, dishwasher, etc.

Overflow: If water overflows from a clogged toilet or sink and causes damage, that damage will be covered by homeowners insurance.

Sewer backup or water backup (available at an additional cost): While not automatically covered in your homeowners insurance policy, water backup coverage can be included for an additional cost. This insurance will cover you if a pipe, drain, sewer line or sump pumps backs up and causes an overflow in your home. This is different from the “overflow” coverage listed above because the backup occurs deeper within the plumbing system than the drain.

To learn more about the differences between damages related to water overflow and backup, check out this article: Water Overflow vs. Water Backup: What’s the Difference?

Service line coverage (available at an additional cost): Service line coverage is an optional coverage that pays for the cost of repairing any damaged pipes or wires (such as power lines, water pipes, septic lines) coming into your property.

Equipment breakdown coverage (available at an additional cost): This optional coverage pays for damage to your home or property caused by forces such as power surges, electrical shorts, mechanical breakdowns, motor burnout or operator error.

Should I buy hazard insurance from my lender?

If your lender is requiring you to have hazard insurance, they may try to sell it to you or even automatically write it into your mortgage, but you aren’t required to buy it from them.

In fact, the policies they offer are usually much more expensive than buying a complete homeowners insurance policy through an agent.

Be aware, not all coverage is full coverage:

Knowing that you have hazard insurance included on your home insurance policy, you’re probably feeling a lot better right now. But since you are already online evaluating your home insurance policies, it might make sense to continue researching to make sure you have the proper coverages.

Did you notice any causes of damage above that seem to be missing? Well, that is because home insurance doesn’t cover everything you might expect it to. 

You might need to purchase some supplemental policies such as  flood insurance, personal liability umbrella insurance, pet insurance, boat insurance, or RV insurance to better cover all of your property. 

Or you may need to perform a review of your personal insurance to make sure any life changes that have occurred since your last review aren’t leaving gaps in your insurance.

If either of those are the case for you, we are here to help. Insurance is supposed to protect you, so we don’t want any insurance gaps to cause a significant out-of-pocket expense. Feel free to reach out to one of our experts at Berry Insurance, so we can help make sure that doesn’t happen to you.

But before you do, it may help to gain knowledge on what some of those existing gaps in your could be. Check out this article to learn what is (and is not) covered by homeowners insurance.