What Is a Hazard Insurance Policy and What Does It Cover?

Hazard insurance is a type of property coverage specifically designed to protect a home’s physical structure from damage caused by certain events. It serves as a financial safeguard for homeowners against unexpected perils that could compromise the integrity of their dwelling.

Understanding Hazard Insurance Coverage

Hazard insurance covers perils that can damage the physical structure of a home, including its walls, roof, foundation, and attached elements like garages or decks. Covered events include fire, smoke, windstorms, hail, lightning strikes, explosions, vandalism, theft, or falling objects like trees.

Coverage can vary based on whether a policy uses a “named perils” or “open perils” approach. Named perils policies cover only the specific events listed in the policy. In contrast, open perils policies provide broader coverage for any event unless it is explicitly excluded in the policy document. Most standard homeowners policies cover the dwelling structure on an open perils basis.

Common Exclusions from Hazard Insurance

It does not cover every possible event or type of damage. Standard policies typically exclude damages from floods, earthquakes, and other earth movements like landslides or sinkholes. These events require separate, specialized insurance policies due to their widespread and costly nature.

Other common exclusions include damage resulting from neglect, poor maintenance, or wear and tear over time. Pest infestations, such as those from termites or rodents, are also generally not covered. Additionally, acts of war, nuclear hazards, and intentional damage caused by the homeowner are typically excluded from coverage. For certain excluded risks, such as flood damage, specific programs like the National Flood Insurance Program offer dedicated policies.

Hazard Insurance and Homeowners Policies

Hazard insurance is not usually a standalone product but rather a fundamental component of a comprehensive homeowners insurance policy. It is commonly referred to as “dwelling coverage” or Coverage A within a broader policy framework. This means that when a homeowner purchases a standard homeowners policy, they are acquiring hazard insurance as part of that package.

Mortgage lenders typically require borrowers to maintain hazard insurance to protect their financial interest in the property. A standard homeowners insurance policy generally satisfies this requirement. Beyond dwelling coverage, a homeowners policy also includes protection for personal belongings, liability coverage for incidents occurring on the property, and additional living expenses if the home becomes uninhabitable due to a covered loss. These additional coverages provide a more complete safety net for homeowners, extending protection beyond just the physical structure.