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Hazard Insurance vs. Homeowners Insurance

Hazard Insurance vs. Homeowners Insurance
Margaret Wack
Updated March 17, 2022
3 Min Read

Hazard insurance and homeowners insurance are both important policies that help to protect your home. But what exactly is the difference between the two? In short, hazard insurance is actually a part of most homeowners insurance policies. You can think of homeowners insurance as the big umbrella, with hazard insurance as well as other types of insurance underneath. We’ll break down these two types of insurance, what they cover, and why they’re important for your home.

What is homeowners insurance?

Homeowners insurance is designed to protect you in case anything happens to your home. This type of insurance covers loss or damage to property, as well as liability coverage in case anything happens to guests visiting your home. A typical home insurance policy includes:

  • Dwelling coverage: Dwelling coverage refers to the physical structure of your home, including the foundation, walls and roof.
  • Personal property: Personal property coverage covers your possessions, including furniture, electronics, and more. In some cases, you may be able to purchase additional personal property coverage for expensive items.
  • Other structures: Homeowners insurance also sometimes covers other structures on your property, like a shed or garage.
  • Liability: Liability insurance protects you in case someone is injured when visiting your home, and can help to pay for legal fees or medical bills in the event of an accident.

Homeowners insurance covers a variety of different events, also known as perils. Some common perils that are typically covered by a homeowners insurance policy include fire, lightning, vandalism or theft, wind storms, water damage, and explosions. Hazard insurance is used to refer to the portion of your homeowners insurance portion that covers these perils.

What is hazard insurance?

As mentioned above, hazard insurance is one component of homeowners insurance. Hazard insurance protects your home from “hazards” like fire, lightning, and theft. These include named perils that are explicitly listed in your policy, as well as unnamed perils that are not explicitly excluded from your policy.

Hazard insurance doesn’t cover liability if someone is injured on your property. Notably, hazard insurance does not include flood insurance, for which you’ll need to purchase a separate policy. Hazard insurance also typically does not cover earthquakes or general wear and tear.

Since hazard insurance is a part of homeowners insurance, it’s not possible to purchase these types of insurance separately. Instead, you should purchase a homeowners insurance policy with a robust hazard insurance component.

The difference between hazard insurance and homeowners insurance

The main difference between hazard insurance and homeowners insurance is in what they cover. Hazard insurance protects the structure of your home from perils like lightning and smoke. While homeowners insurance includes hazard insurance, it also includes things like liability protection.

How to purchase homeowners and hazard insurance

Hazard insurance is just one component of homeowners insurance. When purchasing a homeowners insurance policy that includes hazard insurance, it’s a good idea to get quotes from several different insurance providers in order to compare your options. You should also think carefully about how much coverage you need before making a final decision.

How much does hazard insurance cost?

You’ll need to purchase hazard insurance as part of a homeowners insurance policy. The cost of homeowners insurance will depend on a variety of factors, including where you live, the value of your home, and the coverage limits of your policy. If you live in an area with a high rate of certain natural disasters, such as forest fires or hurricanes, the cost of homeowners insurance may be higher.

Homeowners insurance deductibles and coverage limits

Deductibles and coverage limits are two of the most significant factors when it comes to your homeowners insurance policy. High coverage limits will increase your policy costs. One the other hand, high deductibles will lower your policy costs, since the amount you’ll pay before the policy kicks in will be higher. In general, it’s a good idea to purchase a homeowners policy with a limit that covers the total replacement cost of your home. That way, if anything happens to your home, your insurance policy will help you to cover the cost.

The bottom line

While homeowners insurance and hazard insurance may sound like separate types of insurance, they actually refer to the same type of coverage. Homeowners insurance includes hazard insurance, as well as other types of coverage, like liability coverage.

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