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The mortgage process

What's the difference between homeowners insurance and hazard insurance?

By Julie Tramonte

November 2023
When you’re buying a home for the first time, there may be many new confusing terms that you need to learn, like appraisal, counteroffer, inspection and contingency. And it doesn’t stop once you’re a bona fide new homeowner. In fact, before you even make it to the closing table, you need to know about – and start securing – homeowners insurance.  

Why is homeowners insurance important?

Since your home is probably your most expensive investment, it makes financial sense to protect it with homeowners insurance. In fact, if you get a mortgage to buy your house, your lender will likely require that you have homeowners insurance to close the loan because they want to protect their investment – your home.

Is hazard insurance the same as homeowners insurance?

Although people often use the terms interchangeably, hazard insurance is not homeowners insurance. However, it is a type of coverage included in your homeowners insurance policy.  

A good way to explain homeowners insurance is to talk about car insurance. (Bear with me.) If you have auto insurance, you probably know your policy has different types of protection or coverage, such as liability, collision, personal injury, etc. Homeowners insurance is the same in that it has different types of coverage, including hazard insurance. 

A standard homeowners insurance policy typically includes these coverages:

  • Dwelling/hazard – covers damage to your house and attached structures 
  • Personal liability – covers lawsuits against you 
  • Personal property – covers your belongings if stolen or damaged
  • Medical payments – covers injuries that occur on your property 

What does hazard insurance cover?

Hazard or dwelling coverage is the part of your homeowners insurance policy that covers structural damage to the house, usually related to natural disasters. 

Hazard coverage typically protects your home from damage caused by: 

  • Fire and smoke 
  • Wind 
  • Lightning 
  • Snow, ice, sleet or hail 
  • Water caused by household appliances or burst pipes – not flooding (Flood insurance is a separate component. Same applies to earthquakes.) 
  • Explosions 
  • Fallen trees 
  • Power surges 
  • Theft 
  • Vandalism 
  • Vehicles and aircraft (uncommon, but hey, we’ve heard about things like that happening in the news) 

If your home is damaged, hazard coverage pays for necessary repairs or for rebuilding costs if the house is a total loss. That’s why lenders typically require you to have homeowners insurance. They want to make sure that their investment – the actual home – remains in good condition if they wind up having to take over ownership in the case of foreclosure.  

Can you purchase hazard insurance separately?

No, hazard insurance can’t be purchased separately or as standalone coverage. It’s only available as a component of your total homeowners insurance.

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Julie

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Julie Tramonte is a writer who joined MGIC in 2018. Prior to flying the coop, she wrote for a mattress company, a manufacturer and advertising agencies. She’s obsessed with reading, traveling, tennis and rearranging furniture. Mother of 2 beautiful, adult daughters. Empty nester who recently downsized. Her guilty pleasures are doughnuts and the Kardashians (don’t tell anyone).
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