
Hazard Insurance
Hazard insurance is coverage that protects a property owner against damage caused by fires, severe storms, hail/sleet, or other natural events. If homeowners live in a high-risk area, they often need a separate hazard insurance policy to adequately protect their property, such as a flood insurance policy, or a policy that protects against sinkholes and landslides (such movements of the earth are rarely covered by conventional homeowners insurance's hazard coverage). Within the insurance industry, hazard insurance refers to a portion of a general homeowners insurance policy that protects the structure of the home; catastrophe insurance usually refers to a separate, freestanding policy that covers specific types of disaster, including man-made ones. Strictly speaking, what they want you to have is, in fact, hazard coverage since it is the portion of the homeowners insurance directly related to the home structure itself (as opposed to personal liability, loss of use, or personal property coverage). Usually, purchasing a general homeowners policy will satisfy the lender's requirement, though the level of protection required will depend on the laws of the local municipality and other special considerations. In some areas, certain natural or weather-related activity is excluded from the hazard coverage of homeowners insurance — usually because the area is so prone to these events, and it's too costly for the insurance issuer to include them in a standard policy.

What Is Hazard Insurance?
Hazard insurance is coverage that protects a property owner against damage caused by fires, severe storms, hail/sleet, or other natural events. As long as the specific weather event is covered within the policy, the property owner will receive compensation to cover the cost of any damage incurred. Typically, the property owner will be required to pay for a year's worth of premiums at the time of purchasing the policy, but this practice will depend on the exact details of the policy.
Colloquially, hazard insurance is often considered synonymous with catastrophe insurance. Although both deal with coverage for large-scale, natural disasters, they are technically different. Within the insurance industry, hazard insurance refers to a portion of a general homeowners insurance policy that protects the structure of the home; catastrophe insurance usually refers to a separate, freestanding policy that covers specific types of disaster, including man-made ones.




How Hazard Insurance Works
Hazard insurance protects a property owner against damage caused by fires; lightning; hail-, wind-, snow-, or rainstorms; or other natural events. Hazard coverage is usually a subsection of a homeowners insurance policy that protects the main dwelling and other nearby structures, such as a garage. To be prepared for every contingency, homeowners should be sure that specific, common hazards are covered in their insurance policy package.
The amount of hazard insurance required depends on what it would cost to replace the home in the event of a total loss. This dollar amount may differ significantly from the property's value on the current real estate market. Policies are typically written for one year and are renewable.
Hazard insurance generally refers to the coverage of the structure, roof, and foundation of your home only, though in some policies it can be extended to furnishings and personal belongings, as well.
Homeowners can often elect to beef up the hazard coverage of their policy. It is much better to pay the upfront costs of extra hazard insurance than to deal with the associated legal and medical problems out of pocket. As severe weather events become more commonplace across North America due to climate change, increased hazard insurance may become necessary for more homeowners.
Hazard Insurance and Mortgages
If you have or are taking out a mortgage on your home, it's common for your lender to require you to carry homeowners insurance. Strictly speaking, what they want you to have is, in fact, hazard coverage since it is the portion of the homeowners insurance directly related to the home structure itself (as opposed to personal liability, loss of use, or personal property coverage).
Usually, purchasing a general homeowners policy will satisfy the lender's requirement, though the level of protection required will depend on the laws of the local municipality and other special considerations. If you have a very expensive property in a high-risk area, the lender may require additional coverage.
Separate Hazard Insurance Policies
In some areas, certain natural or weather-related activity is excluded from the hazard coverage of homeowners insurance — usually because the area is so prone to these events, and it's too costly for the insurance issuer to include them in a standard policy. For example, a Florida beachfront property can be susceptible to hurricanes and tropical storms; California properties located close to fault lines face earthquake threats.
If homeowners live in a high-risk area, they often need a separate hazard insurance policy to adequately protect their property, such as a flood insurance policy, or a policy that protects against sinkholes and landslides (such movements of the earth are rarely covered by conventional homeowners insurance's hazard coverage).
Related terms:
Act Of God
An act of God is a phrase used to describe an event outside of human control, such as a natural disaster. read more
Actual Cash Value
Actual cash value is the amount equal to the replacement cost minus depreciation of a damaged or stolen property at the time of the loss. read more
Additional Living Expense (ALE) Insurance
Additional living expense insurance covers additional costs of living incurred by a policyholder who is temporarily displaced from their place of residence. read more
Against All Risks (AAR)
An against all risks insurance policy provides coverage against all types of loss or damage, rather than only specific ones. read more
All Risks
"All risks" refers to a type of insurance coverage that automatically covers any risk that the contract does not explicitly omit. read more
Catastrophe Insurance
Catastrophe insurance protects businesses and residences against natural disasters, such as earthquakes and floods, and against man-made disasters. read more
Coinsurance Formula
A coinsurance formula is the homeowner's insurance formula that determines the amount of reimbursement that a homeowner will receive from a claim. read more
Fire Insurance
Fire insurance covers damage and losses caused by fire and is often purchased in addition to standard homeowners insurance. read more
Flood Insurance
Flood insurance is a type of property coverage that protects homeowners from water damage to the structure and/or contents of their property. read more
Hazard Insurance
Hazard insurance protects a property owner against damage caused by fires, severe storms, earthquakes, or other natural events. read more