Everything You Need to Know About Hazard Insurance Premiums

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Lauren Lewthwaite 24-06-2021

Understanding The Difference Between Hazard Insurance vs. Home Insurance

hazard insurance vs home insurance

If you’ve ever wondered what the difference is between hazard insurance vs homeowners insurance, you’re not alone. The two terms get thrown around interchangeably, but they’re not actually the same thing. And if you have a home, you’ll definitely want to know the difference, especially when it comes to your wallet. 

Keep reading for an in-depth look at hazard insurance and how to get the right hazard insurance quote for your needs. 

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What Is Hazard Insurance?

Hazard insurance is the portion of homeowners insurance that protects your home’s structure from damage. It’s typically not a standalone policy but part of homeowners insurance as a whole, which has multiple components (some of which are optional add ons). Hazard insurance protects your home from natural disasters and other hazards but doesn’t protect your belongings or personal liability. No matter where your home is located, it’s a smart idea to have hazard insurance in case disaster strikes–even if you live in an area that’s not prone to natural disasters. 

Hazard Insurance vs. Homeowners Insurance

Homeowners insurance is a comprehensive policy that can include dwelling protection (also known as hazard insurance), personal liability insurance, and personal property insurance. Homeowners insurance can vary significantly depending on how much coverage you purchase. 

So, what exactly does hazard insurance cover? It protects the actual structure of your home from damage and reimburses you for the cost of repair or replacement (within the limits of your policy). This is a really important distinction–nothing inside the home is protected under hazard insurance, such as appliances, electronics, or even people (personal liability). 

Hazard insurance protects your home from:

  • Natural disasters (fire, wind, lightning, storms, etc.)
  • Explosions
  • Vandalism and theft 
  • Smoke damage
  • Falling trees
  • Frozen pipes
  • Civil unrest
  • Damage from vehicles

Some important exclusions from hazard insurance include flooding damage (you’ll need to purchase separate flooding insurance), neglect, nuclear disasters, earthquakes, and more. Depending on where you live, you may want to purchase additional hazard insurance such as flooding or earthquake protection if they occur often, as these can cause incredibly costly fixes for your home. 

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The Importance of Hazard Insurance

Hazard insurance is important if you have a home. After all, your home is likely one of the biggest investments you’ll ever make and protecting that investment is critical to your financial health and to give you peace of mind. As well, hazard insurance is often required to even receive a mortgage. Financial lenders want to ensure they’re protected before they approve you for a mortgage, and hazard insurance is one of the ways they do that. 

You’ll most often need hazard insurance coverage to match the mortgage provider’s financial interest in your home, but it definitely makes sense to purchase more coverage than required to ensure you can adequately replace or rebuild your home should disaster strike. 

It’s important to note that hazard insurance is designed to cover the replacement value of a home, but actual, current labor and supply costs could end up being much higher than expected when the coverage was purchased. The policy also doesn’t cover the current market value of a home, which can be significantly more than its replacement value.

Understanding Hazard Insurance Premiums

Hazard insurance premiums can vary widely depending on how much coverage you choose. Insurance providers also use a variety of criteria to determine the cost of your policy, including:

  • The value of your home
  • The age of your home
  • Security systems 
  • Where you live
  • Your deductible

Depending on where you live, your credit score may also play a part in determining the cost of your hazard insurance policy. Getting a hazard insurance quote from multiple providers will help you find the best rate and coverage for your needs. 

The Bottom Line

Hazard insurance is not a luxury. When it comes to your home, protecting it and ensuring you can repair or replace any damage is critical for your financial wellbeing, not to mention your peace of mind. Hazard insurance is often required in order to even get a mortgage, but hazard insurance should be a priority either way. 

Lauren LewthwaiteLauren Lewthwaite has been freelance writing for almost five years writing content that ranges from health to insurance and everything in between. Lauren is also a trained translator in French and English and is a dog-mom to an adorable Australian Shepherd.