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Hazard insurance: Natural disaster zones

Fact-checked with HomeInsurance.com

Hazard insurance protects your home from situations you can’t control, such as extreme winds, fire and theft. However, not everyone is familiar with hazard insurance, or understands how it works. What is the difference between hazard insurance and home insurance, and what is hazard insurance on a home?  

In this article, we’ll look at the basics of hazard insurance and explain what it does and doesn’t cover. You’ll also learn how to get additional coverage if you want even more protection. 

What is hazard insurance and how does it work? 

Hazard insurance is a portion of your homeowners insurance policy. If your home is damaged or destroyed by a covered peril, you can file a claim with the insurance company to get reimbursed for the cost of repairs. You’ll be required to pay your deductible before insurance money kicks in.

If your home is damaged, call your insurance provider to see what’s covered. If the damages are caused by a covered peril,document the damage in as much detail as possible with photos, video and written descriptions. You’ll also be given claim forms to submit to explain what happened.

Depending on the extent of the damage, the insurance company will likely send an adjuster to your home to assess the damage in person. Before they come, make a list of everything that was damaged, both inside and outside the house. If you’ve lost personal items, write them down and note how much you paid for them. 

While the insurance company is reviewing your claim, make temporary repairs to certain damages if you can. For instance, having a broken window could cause a variety of issues if it’s not fixed right away. The Insurance Information Institute recommends keeping your receipts for self-repair costs because you might get compensated by the insurance company.

After your claim is approved and you’ve paid your deductible, you’ll get reimbursed in one of two ways: actual cost value or replacement cost value.

  • Actual cost value: Actual cost value reimburses you for losses with depreciation factored in. This is the standard form of reimbursement included with most home insurance policies. For example, if you spent $2,000 to build a porch and it gets destroyed in a fire, you may only be paid $1,000 to fix it. That’s because the value of your home goes down over time. The porch is worth less today than it was when you first built it.
  • Replacement cost value: Replacement cost value is the opposite. It reimburses you for the original price you paid for something. So in the example above, you would get reimbursed the full $2,000 to rebuild your porch if it was destroyed in a fire. Replacement cost value is an add-on to your home insurance policy, and it will increase your annual premium. If the insurance company has to reimburse you for a covered loss based on replacement cost value, they will pay much more than they would for actual cost value. 

Choose the one that best fits your needs and budget.

Where in my homeowners insurance can I find my hazard coverage? 

Your homeowners insurance coverage is divided in six sections. Three of those sections involve hazard insurance—dwelling, other structures and personal property coverage. Here is a breakdown of what is included in your home insurance policy.

  • Dwelling: Dwelling coverage protects the physical structure of your home and any attached structures, like a garage or porch. It is one of the components that makes up hazard insurance. 
  • Other structures: This type of insurance covers structures that are not attached to your home, like a detached garage, pool or fence. Other structures coverage is included in hazard insurance.
  • Personal property: Personal property insurance is also covered by hazard insurance. It protects the personal belongings inside and outside of your home, like furniture, appliances, toys, clothes and garden tools. 
  • Loss of use: Loss of use coverage is also called additional living expenses. It pays for your hotel and restaurant fees if you can’t live in your home due to covered damage.
  • Personal liability: Personal liability insurance protects you in a lawsuit if you accidentally damage someone’s property and they sue you. It also covers you in a legal situation if someone gets injured in your home and you are at-fault.
  • Medical payments: If someone gets injured in your home, medical payments coverage will help you pay for their medical fees. This coverage applies regardless of who is at-fault.

Essentially, hazard insurance covers the physical items and structures that are susceptible to damage. Loss of use, personal liability and medical payments are additional parts of your home insurance policy that cover you and the situations you might face.

What does hazard insurance cover? 

Hazard insurance protects your home and your belongings from certain perils listed in your policy. Your insurance is either a named perils policy or an open perils policy. 

Named perils

In a named perils policy, you are only covered by a specific list of events. The list of perils is usually consistent between insurance providers. The covered perils include:

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Vandalism
  • Volcanic eruption
  • Riots
  • Plane or car crashes
  • Smoke damage
  • Theft
  • Falling objects
  • Weight of ice, snow, or sleet
  • Accidental discharge or overflow of water or steam
  • Accidental tearing, cracking, burning, or bulging
  • Freezing
  • Accidental damage due to short circuiting

If it’s not on the list, your provider won’t cover it. If you have a named perils policy, make sure you know what’s on the list so you know if you can make a claim in case of damage.

Open perils

If you have an open perils policy, the insurance company will cover any loss that is not explicitly excluded in your policy. Because of that, open perils policies tend to be more expensive than named perils policies. The situations that are not covered under an open perils policy include:

  • Floods
  • Earthquakes 
  • Mudslides
  • Sewer backups
  • General wear and tear
  • Theft from a home under construction
  • Vandalism to a vacant home
  • Power failures
  • Rust and corrosion
  • Mold
  • Mechanical breakdowns
  • Boiler explosions
  • Animal, insect or pest damage

What add-on hazard insurance options are there?

If you want coverage for situations that are not included with your hazard insurance, consider purchasing add-ons. For instance, you can purchase separate insurance policies for flood and earthquake coverage. If you live in an area that is susceptible to natural disasters, you can also opt to increase your hazard insurance coverage for an added cost.

The takeaway

Hazard insurance is an important part of your home insurance policy. It protects your home and your belongings from extreme weather events, fire and theft. 

If you need to file a home insurance claim, check with your provider to determine if your policy includes actual cost value or replacement cost value. You should also find out if you have a named or open perils policy. Make sure to thoroughly document any damages and list personal items that need to be repaired. Getting everything ready for the insurance company will expedite the claims process and help you get paid faster.

Elizabeth Rivelli

Elizabeth is an insurance writer for coverage.com, where she covers insurance providers and reviews policies to help consumers find comprehensive and affordable coverage for every area of their life. She has more than three years of writing experience for top online insurance and finance publications.

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