Hazard insurance is the part of your homeowners policy that protects the structure of your home against covered perils like wind, hail, fire, and more. Wind and hail are the most frequent source of homeowners claims—about 45% of claim counts nationally in the latest multi‑year ISO data compiled by the Insurance Information Institute (source). Since 2020, the U.S. has also seen exceptionally high severe convective storm activity (hail, straight‑line wind, tornado), with record or near‑record counts of billion‑dollar disasters per NOAA; global research from Swiss Re and Aon shows these storms driving unusually high insured losses—making hazard coverage a critical part of your protection.
Read on to see how hazard insurance fits within homeowners insurance, what lenders typically require, and how today’s market trends affect cost and coverage. Premiums have risen sharply in many states, with the CPI category for household insurance showing double‑digit year‑over‑year increases through parts of 2024 (BLS). Insurers are increasingly using tools like percentage wind/hail or hurricane deductibles, roof age/material limitations, and settlement changes (ACV vs. RCV) to manage losses (LexisNexis; NAIC). Climate‑linked extremes are raising the baseline for weather losses, which influences claim activity and coverage terms (WMO).
Is homeowners insurance the same thing as hazard insurance?
Yes—“hazard insurance” commonly refers to the property (dwelling) component within your standard homeowners policy. The same policy also includes coverage for your belongings and liability. Note that flood is excluded from standard homeowners forms; if your home is in a Special Flood Hazard Area, separate flood insurance is federally mandated—see FEMA’s updated Mandatory Purchase Guidelines. For other high‑risk perils in some regions (e.g., wind in certain coastal areas or wildfire zones), coverage may be provided by specialty or residual market policies paired with a “wrap/DIC” policy to approximate HO‑3‑like protection (NAIC).
Most standard policies bundle hazard and other homeowners protections by default. If you have a mortgage, your lender will require continuous hazard insurance meeting investor standards set out in the Fannie Mae Selling Guide and Freddie Mac Seller/Servicer Guide, including replacement‑cost‑oriented coverage and “reasonable” deductibles. In catastrophe‑exposed areas, percentage wind/hail or named‑storm deductibles are common, and lenders generally limit them to levels around 5% to remain acceptable under GSE guidance (confirm specifics with your lender and the applicable guide). If flood coverage is required, it must meet FEMA’s minimums per the Mandatory Purchase Guidelines. If you let required coverage lapse, your servicer may obtain force‑placed insurance after notices consistent with Regulation X. In Florida’s residual market, Citizens policyholders are subject to a phased requirement to carry flood insurance through 2027 (Citizens).
What is Homeowners Insurance?
Homeowners insurance (e.g., HO‑3/HO‑5) spells out what’s covered, excluded, and your deductibles. It typically provides replacement‑cost‑oriented coverage on the dwelling if insured to value, with separate limits for other structures, personal property, liability, guest medical, and loss of use/ALE. Standard policies exclude flood; you can buy flood coverage through the NFIP or qualifying private flood insurers, depending on lender acceptance and your risk. Insurers and regulators encourage accurate replacement‑cost estimates to keep coverage aligned with current rebuild costs and to qualify for full replacement‑cost benefits (Triple‑I).
When you have a covered loss, you’ll submit documentation and may receive an initial payment on an actual cash value (ACV) basis with the “recoverable depreciation” paid after repairs if you carry replacement cost coverage. Best practices include maintaining a home inventory, taking photos/video of damage, making only reasonable temporary repairs to prevent further damage, and saving all receipts—steps that speed claims and reduce disputes (Triple‑I claim guide; NAIC inventory). If flood is involved, the NFIP generally requires a signed Proof of Loss within 60 days unless FEMA announces an extension (FloodSmart).
What is Hazard Insurance
Hazard insurance refers to the dwelling portion of your homeowners policy that pays to repair or replace the home itself when a covered peril occurs. Policies are written either on a “named perils” basis (specific hazards listed) or “open perils” (all risks unless excluded). In recent ISO/Triple‑I data, wind/hail is the most common homeowners claim by frequency (~45%), while fire/lightning has the highest average severity per claim; water/freezing is also a major driver of claims (Triple‑I). Since 2020, a surge in severe convective storms has increased wind/hail claims in many regions (NOAA; Aon), and climate‑linked extremes are raising loss volatility across perils (WMO). Flood is excluded from standard homeowners policies; NFIP and private flood claims often average in the tens of thousands of dollars and vary widely by event (FEMA OpenFEMA NFIP claims).
Types of Claim Reimbursement
After damage, prioritize safety and mitigate further loss (tarps/board‑ups), photograph everything, and keep damaged items or samples. Notify your insurer promptly to open a claim, keep a claim diary, and save receipts for temporary repairs and Additional Living Expenses; these steps are widely recommended and often reimbursable for covered losses (Triple‑I; Ready.gov). If the loss is a flood, the NFIP typically requires a signed Proof of Loss within 60 days unless FEMA extends the deadline (FloodSmart). If you have a mortgage, claim checks may be payable to you and your servicer—contact the servicer early to learn their release process (CFPB).
Insurers generally settle structure claims using either actual cash value (ACV) or replacement cost value (RCV). Many policies initially pay ACV and then release recoverable depreciation after repairs under RCV provisions. Given today’s affordability pressures and elevated wind/hail losses, carriers in some states have shifted roof surfaces to ACV or added roof schedules, while offering endorsements to buy back RCV—terms that materially affect both premium and claim outcomes (LexisNexis; Triple‑I; TDI).
Actual Cash Value
ACV pays the depreciated value of damaged property (replacement cost minus depreciation), which lowers the claim payout but usually reduces premium. In hail‑exposed regions, ACV is increasingly applied to roof surfaces or older roofs to control loss costs, with optional endorsements to restore RCV in some cases (LexisNexis). Premiums for homeowners coverage have risen notably—double‑digit year‑over‑year at times during 2024—so some owners choose ACV to manage costs (BLS CPI).
Consider a storm damage claim to repair your roof. If your roof was eight years old and had an estimated cost of $15,000 brand new, your insurance company would calculate your claim as $15,000 minus your deductible and the equivalent of eight years of depreciation, then cut you a check for the remainder. If your deductible was $1,000 and your depreciation was $1,200, you would receive a check for $12,800.
ACV can be a fit for homeowners seeking lower premiums and who can absorb depreciation at claim time. Weigh the trade‑off carefully in hail/wind belts where repeated roof claims are common.
Replacement Cost Value
RCV pays to repair or replace with like kind and quality without deducting depreciation, typically via a two‑step process: initial ACV payment, then recoverable depreciation after proof of completed repairs within policy timelines. RCV generally costs more but reduces out‑of‑pocket exposure for major losses (Triple‑I; TDI).
Using the same example of repairing an eight-year-old roof, your payout under the replacement cost value method would be $14,000. The insurance company would calculate your claim as $15,000 for the repairs minus your $1,000 deductible, and they would not deduct anything else, regardless of the age of the roof at the time of the claim.
To qualify for full RCV, carriers typically require insuring the home to current replacement cost and completing repairs within stated timelines. Ask about Ordinance or Law coverage for code upgrades and review any roof‑specific terms to avoid surprises at claim time.
FAQ
Do I need to purchase a separate hazard insurance policy if I have homeowners insurance?
No. The hazard (property) protections are part of your standard homeowners policy. However, standard policies exclude flood (and typically earthquake), so you may need separate flood coverage—your lender must require flood insurance when a building securing the loan is in a Special Flood Hazard Area, per FEMA’s Mandatory Purchase Guidelines. Private flood options can complement or exceed NFIP limits and features; FEMA’s NFIP uses reinsurance and capital markets to help maintain capacity (NFIP reinsurance). Some homeowners also add parametric supplements to help with deductibles or rapid cash after events (NAIC parametric overview).
Can you cancel hazard insurance?
Possible, but risky and generally not allowed if you have a mortgage. Lenders require continuous hazard (and, where applicable, flood) insurance that meets investor standards (Fannie Mae; Freddie Mac). If coverage lapses, servicers may obtain force‑placed insurance after providing required notices under Regulation X. Even if you own your home outright, dropping coverage exposes you to potentially catastrophic out‑of‑pocket costs, especially as weather‑related losses and premiums remain elevated (NOAA; BLS).
