What to Know Before You Buy Hazard Insurance vs. Home Insurance

The home buying process is filled with twists, turns, and terms that don’t always make sense to buyers and sellers. We created a glossary of real estate terms and their definitions to help, but some terms deserve a longer explanation so you can make the right decision before you buy. For example, a common question involves the difference between hazard insurance vs. home insurance. Are they the same, and if not, do you need both or just one? If you’re not clear on whether you should buy hazard insurance, home insurance, or another type of policy altogether, here’s what you need to know before you get to closing day.

What Is Hazard Insurance?

The first detail to know is that hazard insurance is a type of coverage that is usually included on the average homeowner’s insurance policy. This means you’re not typically going to choose between hazard insurance and home insurance. As long as you buy a home insurance policy as required by your lender, you’ll have hazard insurance as part of that policy.

But if you ever need to use the hazard insurance within your home insurance policy, you’ll want to know a little more about it. For instance, what does it cover? You don’t want to risk the embarrassment of calling your insurance company to ask if your hazard insurance will replace your extensive hula hoop collection after a burglary. This is not that kind of insurance!

So, what kind of insurance is it then? The key point of hazard insurance is to cover structural damage to the home after an unforeseen event, such as a natural disaster. This is why it’s also called dwelling coverage, as it only covers the house itself. More specifically, hazard insurance usually covers damage to your home because of the following perils:

  • Fire
  • Tornado
  • Hurricane
  • Vandalism
  • Snowstorm
  • Lightning
  • Hail
  • Explosion
  • Fallen trees
  • Cars that have hit your home

Basically, if any of these perils cause damage to your home, hazard insurance will pay to repair or rebuild it. But would this coverage pay to replace your furniture and clothing after a fire? The answer is no, as that’s what your homeowner’s insurance policy is for.

What Is Home Insurance?

The main difference between hazard insurance vs. home insurance is that hazard insurance covers the structure, meaning it will pay to repair or rebuild your house. But it’s hard to imagine a tornado, hurricane, fire, or other disaster damaging your home without also damaging some of your belongings. Whether hail damages your roof or a hurricane rips through the side of your house, your furniture, electronics, decorations, and anything in the room at the time will likely be ruined. That’s where home insurance comes in.

The hazard part of your home insurance policy will take care of the damage done to the house itself. But dwelling coverage is only one part of your home insurance policy. The others include the following:

Personal property: This is the coverage you’ll use to fix or replace personal belongings if they’re ever damaged in a disaster or stolen from your home.

Liability: This pays for your expenses if someone is hurt in your home and needs medical attention, as liability can pay for the medical costs for the injured person and your legal costs if you’re sued.

Loss of use: If you can’t live in your house while it’s being repaired or rebuilt after a disaster, loss of use coverage will pay for you to stay in a hotel room and eat meals at restaurants until you can return to your house.

Other structures: This covers standalone structures on your property, such as a shed or fence.

You can add other types of coverage to your home insurance policy, but these four, plus hazard insurance, are the core coverage types. They protect not only you but also your lender’s investment, which is your house. This way, if the worst occurs, you typically only need to pay a deductible—usually $500 or $1000—before your insurance company will pay for repairs. That’s a lot more manageable than paying for a whole new house, or even just new furniture and clothes after a disaster destroys them!

Basically, you need hazard insurance for peace of mind as a homeowner, as you want to make sure you don’t have to pay out of pocket for your house to be rebuilt or repaired after a disaster. But you also need home insurance to cover everything else that could go wrong with your home, from burglary to natural disasters that damage your stuff. So it’s not a question of hazard insurance vs. home insurance; both are important if you want the most protection for your home.

Is Hazard Insurance Required When You Buy a Home?

As you prepare for closing day, you’ve likely seen references to the need for insurance as a home buyer. There’s hazard insurance, title insurance, homeowner’s insurance… the list never seems to end! So, exactly what kind of insurance policies do you need as a home buyer? And more importantly, is hazard insurance one of the required policies? The answer is yes and no. We know; it can be confusing.

You do need hazard insurance as part of your coverage, but you’ll get that when you get a home insurance policy—which is required by your lender if you want to finance a house. This means you don’t have to worry about going out and buying a separate hazard insurance policy, nor do you need to compare hazard insurance vs. home insurance as closing day approaches. Just get a home insurance policy, and you’ll have the hazard insurance you need to protect your dwelling.

While you’re looking at home insurance, keep in mind that you can—and probably should—add extra coverage for certain disasters that aren’t normally covered by insurance. For example, home insurance doesn’t usually cover water damage caused by flooding. So if you want as much coverage as possible, you should buy flood insurance.

In fact, if you live in a floodplain—where floods aren’t unusual—you’ll be required to buy flood insurance in addition to a home insurance policy. Similarly, you may be required, or at least encouraged, to buy supplemental insurance for specific natural disasters—such as tornadoes or earthquakes—that are common in your area. Otherwise, any damage caused by these types of disasters won’t be covered, so you’ll have to pay for the repairs out of pocket. And that’s definitely not something you want to deal with as you recover from an experience as distressing as a tornado or earthquake!

Fortunately, LemonBrew offers a wide range of insurance options for homeowners and renters alike. So whether you want homeowner’s insurance, renter’s insurance, or coverage for your mobile home, we can help! Contact us today to get a free insurance quote and learn more about how you can save by bundling home, auto, and more.

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