Is Hazard Insurance Included in My Homeowners Policy?

Julia Taylor
Julia Taylor

Hazard insurance is the portion of your coverage that protects your home in the event of a number of common perils, such as storm damage or accidental fires. Since approximately one in every 40 homes has a damage claim from wind or hail each year, hazard insurance is an important component of your homeowners’ insurance protection.

Read on to better understand hazard insurance vs homeowners insurance and how each type of insurance can help you stay well protected in the event of a claim.

Is homeowners insurance the same thing as hazard insurance?

Although some mortgage companies refer to hazard insurance separately, homeowners’ insurance and hazard insurance are protections offered by the same policy. In the event of a natural hazard, such as a tornado or hurricane, the hazard insurance portion of your policy will cover the repairs or replacement of your home, and the homeowners’ insurance portion will cover the replacement of your personal belongings. If a guest in your home also incurred damage as a result of the hazard and decided to sue you, your homeowner’s insurance would also cover any losses due to liability.

Most standard homeowners’ policies include both hazard insurance and homeowners’ insurance by default. If you have a mortgage on your home, your lender probably requires a minimum level of hazard insurance to protect their investment in your home (sometimes referred to as “replacement coverage”). If your home is completely paid off, you may have the option to remove hazard insurance from your policy, but you would then be responsible for covering any storm damages or other hazard-related losses out of pocket.

What is Homeowners Insurance?

Homeowners insurance provides financial coverage to homeowners for certain types of losses. A homeowners insurance policy will specify how much coverage is provided, when the policy will apply, any special exclusions where coverage will not be provided and the amount of the deductible when a loss occurs.

When a covered loss happens, your insurance company will ask for proof of the event and additional documentation, such as pictures of the damages. In some cases, they may send an adjuster out to view the damage in person and further document any losses. Your insurance company will calculate the amount of the loss, subtract the amount of your deductible, and cut you a check for the remaining amount.

What is Hazard Insurance

Hazard insurance is the portion of coverage in a standard homeowners policy that covers repair or replacement costs of your home when specific perils occur. Depending on your insurer and the type of policy you purchase, the covered perils may be specifically named in the policy, or your policy may state that everything is covered except for named exclusions. Regardless of your policy type, hazard insurance is designed to provide financial assistance to help you recover from disastrous events, such as fires, tornadoes, or vandalism.

Types of Claim Reimbursement

When a peril occurs, your first step as a homeowner is to file a claim with your insurance company. You’ll work with a claims agent to determine what is covered under your homeowners insurance policy and how much reimbursement you can receive in order to pay for any damages resulting from the covered event.

In the event of a claim, insurance companies can use two different methods for evaluating losses and calculating claims reimbursement: actual cash value or replacement cost value. The calculation method will affect the price of your policy and the amount you’ll receive in the event of a claim, so be sure to understand your options and which calculation method your insurance company uses before committing to a policy.

Actual Cash Value

With the actual cash value method, your insurance company will deduct depreciation from the replacement cost for your claimed items, meaning you’ll receive less if you have a claim. However, actual cash value policies typically come with lower premiums, so policyholders can save money each month on their insurance costs.

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.

Actual cash value is likely to be better for homeowners who are looking for the lowest insurance premiums and who already have some savings set aside to cover the depreciation costs in the event of a claim.

Replacement Cost Value

With the replacement cost value method, your insurance company will not deduct depreciation from your claim. This method gets you the most money in the event of a claim, but companies that use replacement cost value calculations also tend to have higher premiums.

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.

Replacement cost value is better for homeowners who want the highest levels of coverage and can afford higher premiums.


Do I need to purchase a separate hazard insurance policy if I have homeowners insurance?

No, you do not need to purchase a separate hazard insurance policy. Your standard homeowners insurance will cover named hazards, though you may need to add additional coverage to your policy for certain hazards, such as earthquakes or floods.

Can you cancel hazard insurance?

It is possible to cancel hazard insurance in some situations, but usually only if your house is free and clear of any mortgages. Even if you own your home outright, discuss your situation with your insurance agent before removing hazard insurance since this can leave you open to significant risk once it is removed from the policy.

About the Authors

Julia Taylor is a freelance writer based in Nashville, TN. She takes complex business, financial, and technical topics and makes them easy to understand. She worked in the insurance industry for several years as a licensed agent in Tennessee. You can find her work published on a variety of business blogs, including Paychex, Kapitus, Sanford Brown, Fortis Educational Institutes, American University of Antigua, and She also earned her bachelor's degree in business from the University of Tennessee and her MBA from Tennessee Tech University. When she's not working on her next writing piece, you can find her working in the yard or spending time with her three teenaged children.