How Does Hazard Insurance Differ from Homeowners Insurance?

Hazard insurance protects your home against losses due to disaster incidents.
Written by Jason Unrau
Reviewed by Carrie Adkins
Hazard insurance covers your property in the case of disaster events.
You’ve applied for a mortgage and been approved. As always, there are conditions you have to meet. One of those conditions is a minimum amount of hazard insurance on the property named as collateral on the mortgage. But what is hazard insurance, and how does it differ from homeowners insurance? Here’s what you need to know, with a little help from
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What Is hazard insurance?

If you have coverage that protects your home against losses, that’s considered
hazard insurance
. That can refer to natural disasters like wildfires, tornadoes, volcanic eruptions, blizzards, or lightning, or it could be manmade disasters like vandalism or a plane crash.
The catch is that only the structure itself is covered by hazard insurance. Your physical dwelling is insured against loss including attached structures such as a garage, but your personal belongings are not a part of hazard insurance.

Why is hazard insurance required?

When a financial institution lends you money to buy or refinance your home, they want a relatively low-risk guarantee that they’ll get their money back one way or another. The preferred way is for you to make your mortgage payments on time so they collect the interest along with the principal amount.
But if your home is wrecked before it’s paid off, they want the guarantee that an insurance policy can reimburse them for the loss. Otherwise, you would be on the hook for costs whether you caused the damage or not. Hazard insurance ensures that the lender gets their money back, one way or another.
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What's the different between hazard insurance and homeowners insurance?

Hazard insurance and home insurance are basically the same policy.
An insurance company may specify on the mortgage requirements that you must have hazard insurance, but your
homeowners insurance policy
contains the coverage you need to satisfy their rules. Hazard insurance is a major component of homeowners insurance.
MORE: How much personal property protection do you need?

Do I need hazard insurance if I don't have a mortgage?

If you’re one of the lucky ones that has paid off your mortgage already, you may be wondering if it’s necessary to carry hazard insurance. While it’s not mandatory to insure your home if you aren’t required by your lender, it’s always a good idea to carry homeowners insurance that contains hazard insurance.
It’s particularly important to have hazard insurance coverage if you live in a state that’s at high risk of a natural disaster. For example, hurricanes are common in Florida, Texas, Louisiana, North Carolina, and even New Jersey. Tornado Alley includes Kansas, Nebraska, and Oklahoma. If your home is damaged or destroyed in a natural disaster and you don’t have any coverage, you’re on your own for any losses.
Keep in mind that losses aren’t always restricted to just your home, though. If a tornado takes your roof off and slams it into a neighbor’s home, you could be liable for their damages too. To that end, hazard insurance can be seen as an indispensable part of a homeowners policy.
Key Takeaway You still need hazard insurance if you've paid off your mortgage.

Are all losses covered by hazard insurance?

When you buy homeowners insurance, there are often exclusions listed. In many cases, earthquake and flood damage are excluded.
If you’re in an earthquake or a flood-prone area, consider adding coverage for
excluded perils
that could affect you. It could be as an added coverage through your current insurer or you may have to find coverage through a private insurance provider.

Find the best rate on hazard insurance

The good news is that hazard insurance can be inexpensive—especially if you bundle it with your
car insurance
. For the best rate on that, try
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