What is the difference between home insurance and hazard insurance?
Insuring your home can be confusing, there are dozens of insurers to choose from and while most insurance policies are pretty standard, there can be differences. One issue that crops up is the difference between homeowners insurance and hazard insurance. If you are currently shopping for coverage and wondering how hazard insurance is different than a homeowners policy, you are in the right place.
Reviewing the Differences
Hazard insurance is simply a portion of your homeowners policy, it is not a separate insurance policy. Hazard insurance or dwelling coverage which is a more common name, covers the structure of your home and lists out the hazards that your policy protects it against.
According to Nationwide Insurance, the main reason “hazard insurance” is a common term in the insurance world is because of mortgage lenders. They require “hazard” insurance at a minimum as it protects their investment in your home. Hazard insurance is not something that can be purchased separately than a homeowners policy, if your lender mentions hazard insurance they are referring to purchasing a homeowners policy to protect your home.
Homeowners insurance
A homeowners insurance policy consists of a variety of coverages that work together to protect various parts of your home. Homeowners insurance not only protects the structure of your home but also your personal possessions, detached structures on the property as well as liability issues.
Common coverages that are included in standard homeowners insurance policies include:
- Dwelling coverage: This is the section of the policy that would also be considered hazard coverage. Dwelling coverage protects the actual structure of your home including the foundation, roof, walls, windows.
- Loss of use: If you are unable to stay in your home due to damage by a covered peril, this coverage will help pay for your living expenses such as hotel and restaurant bills.
- Other structures: If you have detached structures on your property such as a garage, shed, outbuilding or other structures up to your policy limits.
- Personal liability: If someone is injured on your property or in your home, the personal liability section of your policy will help cover any medial and legal expenses up to your policy limits. It will also cover the cost of damage that any of your family members do to other people’s property, for example, if your child puts a baseball through the neighbors window, your policy would cover the repair costs.
- Personal property: Your personal possessions are covered against loss due to a covered peril. In most cases your personal property losses are capped at 50-70% of your coverage limits.
Hazards that are covered
While most homeowner policies are fairly standard when it comes to covered perils, the list can vary so always make sure you read your policy in full. Most policies cover the following perils:
- Electrical current
- Explosions
- Falling aircraft/objects
- Fire
- Freezing of A/C or heating systems
- Hail
- Lightning
- Overflow of water or steam
- Riots
- Smoke
- Theft
- Vandalism
- Vehicles
- Volcano eruptions
- Weight of ice or snow
- Windstorms
There are policies available called open peril policy which protect against all perils except the exclusions listed in the policy. While exclusions can vary, these are pretty common:
- Collapse of internal structures
- Discharge of pollutants
- Earth movement
- Government intervention/ action
- Intentional damage by owner or inhabitants
- Mechanical breakdown
- Mold, wet rot, or fungus
- Neglect
- Normal wear and tear
- Nuclear fallout
- Ordinance of law