What Is Hazard Insurance & What Does It Cover? | Property Insurance Coverage Law Blog


When it comes to protecting your home, hazard insurance plays a crucial role. Many people, however, do not fully understand how it protects your home, the exceptions or pitfalls to watch out for, and how to properly review your coverages. That means when something goes wrong, or you’re confused about your coverage after a loss, you might not be entirely sure how to move forward. Knowing exactly what hazard insurance is (and isn’t) can help protect you financially during a crisis.

So, how does hazard insurance work exactly? Let’s break it down.

What Is Hazard Insurance?

Essentially, hazard insurance provides financial protection for the structure of your house itself. It specifically addresses damage to the physical structure of your home caused by sudden occurrences, often also called perils. Hazard insurance is a term often used interchangeably with dwelling coverage. It is a vital component of a standard homeowners insurance policy.

What Does Hazard Insurance Typically Cover?

As we stated above, hazard insurance covers occurrences called “perils” that cause damage to your home. The perils you are covered for are stated in your policy, but perils tends to includes events like:

  • Fires
  • Lightning
  • Windstorms and Hail
  • Smoke
  • Weight of Ice, Snow, or Sleet
  • Accidental Discharge or Overflow of Water or Steam
  • Sudden and Accidental Tearing Apart, Cracking, Burning, or Bulging
  • Freezing
  • Sudden and Accidental Damage from Artificially Generated Electrical Current
  • Explosions
  • Aircraft crashes
  • Vehicle accidents
  • Theft
  • Vandalism or Malicious Mischief
  • Theft
  • Sinkhole
  • Any Other Peril Not Specifically Excluded (dwelling and other structures only)

What Hazard Insurance Does Not Cover

While hazard insurance provides robust protection, there are certain situations it does not cover:

  • While hazard insurance often covers storm damage, you may be required to purchase additional insurance to protect against damage caused by floods, mudslides, or earthquakes (i.e. flood insurance or earthquake insurance).
  • Personal property (furniture, electronics, clothing, etc.) is not covered by hazard insurance. For this, you rely on the personal property coverage within your homeowners insurance.
  • Hazard insurance does not extend to liability coverage (for injuries or property damage to others) or additional living expenses if you need to temporarily vacate your home during repairs.

Hazard Insurance in Florida

In Florida, the last “any other peril” is commonly known as making the hazard policy an “all perils” policy. Literally all perils are covered unless the policy itself excludes a particular occurrence. Again, the common designation for these types of policies, at least in Florida, are called HO3 policies and are the more desired ones because of the breadth of coverage.

However, it’s essential to review your policy to understand precisely which perils are covered. For example, many homeowner hazard policies exclude damages from flooding which must then be covered by its own separate policy and is usually governed by federal law and FEMA.

Sinkholes are another phenomenon which have now been mostly written out of policies in Florida. At the beginning of the policy there is a checklist of the above-named perils and then either a “Y” or “N” (for yes or no) to indicate whether that peril is covered or not under the policy. This introductory information sheet forms part of what is called the declarations sheets because they “declare” certain limitations, exclusions, or other important conventions that apply throughout the policy.

The thing to remember is that hazard insurance is not a maintenance policy. Hazard insurance covers accidents or sudden disasters, not neglectful maintenance or long-running issues. For example, hazard insurance may cover a sudden pipe break which causes damage to your property. If you have had a leaky pipe for months and never did anything about it, hazard insurance may not cover you if that leaking has damaged other property, like flooring, cabinets, baseboards, drywall, and so on.

Is Hazard Insurance the Same as Homeowners Insurance?

Homeowners insurance is a broader umbrella that contains hazard insurance, but it goes well beyond hazard claims to include protection for your belongings, and it also covers structures that are generally not connected to your home living structure, like fences and sheds. It may also include coverage for accidental injuries or property damage to others when the policyholder is at fault or “liable” for the injury. In other words, if you invite someone over to your home, and they trip and fall and get hurt because of this, you may be held liable for their injuries.

Finally, homeowners insurance can include support if you’re temporarily displaced due to damages. This can cover staying at a hotel or even renting a different home in which you have to stay until your home is fixed because of some peril which makes your home unlivable. The peril that made your home unlivable has to have been covered in the first place.

In summary, while hazard insurance is a critical part of homeowners insurance, the latter provides a broader safety net for homeowners.

Why Is Hazard Insurance Important?

As severe weather events become more common due to climate change, increased hazard insurance is increasingly necessary for more homeowners. Homeowners are realizing that it’s better to pay upfront costs for extra hazard insurance than to deal with legal and medical problems out of pocket.

Remember, hazard insurance focuses on protecting the structure, roof, and foundation of your home. For specific risks (such as floods or landslides), homeowners may opt for separate or additional hazard insurance to cover specific contingencies.

Why Do I Have Hazard Insurance on my Mortgage?

When you see hazard insurance on your mortgage, that often means you are paying for your premiums through an escrow account. This is the most common way homeowners pay hazard insurance premiums. How much you are paying is impacted by several factors, which we discuss more below.

How Much Does Hazard Insurance Cost?

The cost of hazard insurance is generally impacted by the state you live in, the amount of risk for natural disasters in your area, and the amount of hazard insurance that you need. While those other factors are largely out of your control, know that the amount of insurance required generally depends on what it would cost to repair the home in case of a less than total loss and the 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. Here are the factors that affect the total cost of your hazard insurance:

Different Levels of Coverage

There are generally three levels of hazard insurance coverage:

  • Actual Cash Value (ACV): Reimburses based on the property’s current value, considering depreciation.
  • Replacement Cost Value (RCV): Provides reimbursement for the cost of replacing the damaged property without factoring in depreciation.
  • Extended Replacement Cost: Offers additional coverage beyond the replacement cost value.

What Should I Do if my Hazard Insurance Claim Is Denied?

Seek the advice of a legal representative experienced in insurance matters immediately. The longer one waits, the greater the chance that any opportunity for recovery may lessen or be barred altogether.

Insurance companies rely on their own trained adjusters and insurance professionals, including departments filled with attorneys: Why would one want to fight that kind of battle without a professional on their own side?

There are numerous ways to challenge the claim denial, and your attorney can tell you about them, including appeals for re-inspection, mediations, appraisals, complaints to the state about the practices of your insurer when it has acted in a less-than-good-faith manner, and so on. The territory is broad, and you should have someone who knows how to traverse it on your side.

How Do I Research an Insurance Company’s Claims History?

Insurers do not always act in your best interest. In fact a company’s highest duty is to make money for its shareholders despite whatever a commercial might say! In making the most money for its shareholders, the policyholder is the one who is sometimes left out in the cold with little recourse if it were up to the insurance company. Knowing some of the tricks and gimmicks insurers engage in would be worth the time to investigate before you tie yourself up with that company with a policy that can cost you thousands and thousands of dollars. The following are just a few links to stories where the insurance company seeks to unfairly limit the options policyholders may have or how to protect yourself in certain instances.

Further Resources on Insurance Coverage Law

Navigating the complexities of insurance claims can feel overwhelming. Whether you’re facing unpaid claims or simply filing for the first time, our eBooks equip you with the crucial information you need to advocate for yourself with confidence.

Why Merlin?

Are you fighting an insurance company that won’t pay out on claims? With over 39 years of practice and $2 billion in recovered claims, our team stands by your side to ensure you can face any insurance challenge with confidence. Contact us today for a consultation, or read more about how we act as your trusted advocate.



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