What is Hazard Insurance?

Hazard insurance isn't a standalone product. It's the portion of a homeowners insurance policy that covers physical damage to the structure: fire, wind, hail and similar perils. Also called dwelling coverage or Coverage A, it's automatically included in standard policies. The full policy also includes personal property, liability and loss of use coverage.

Home insurance policies fall under two coverage types: named perils and open perils. Named perils cover only the risks listed in the policy. Open perils cover everything except exclusions spelled out in the contract.

Hazard coverage, under either type, applies to sudden, accidental events that damage or destroy the home's structure. The common perils homeowners insurance covers:

Hazard insurance covers a broad range of perils, but specific exclusions apply. Some require separate policies; others fall on the homeowner to address through upkeep.

Mortgage status, property location and risk exposure all determine whether homeowners insurance is required.

When we compared the cost per dollar of dwelling coverage across all five tiers, the $250,000 dwelling tier offers the best value. Moving from $100,000 to $250,000 in dwelling coverage costs $135 more per month but adds $150,000 in dwelling protection, $75,000 in personal property and $100,000 in liability. That's the largest coverage jump relative to premium increase in our data. 

At the $250,000 tier, the gap between the cheapest and most expensive insurer is $375 per month; AIG at $92 versus Progressive at $467. That $4,498 annual spread means the insurer you choose matters more than almost any other coverage decision you'll make.

For homeowners who need higher liability limits without the dwelling increase, a separate umbrella policy may cost less than upgrading to the $750,000 tier.

**NOTE: The rates above are averages based on a sample homeowner profile. Actual rates may differ. Talk with several insurers and compare home insurance quotes based on your specific home and personal factors.

The price of hazard insurance isn't the same for every homeowner. When we analyzed rates across 15 insurers, the factors below had the largest impact on what homeowners pay. The $375 monthly spread between the cheapest and most expensive insurer at the $250,000 dwelling level shows how much these variables move the needle: where you live, what your home is made of and which insurer you choose all compound on each other.

• Home Age and Condition: Older homes cost more to insure when wiring, plumbing or roofing needs updating. Roof type carries significant weight: a metal or slate roof can cut your premium compared to aging asphalt shingles.
• Construction: Brick and stucco construction costs less to insure than wood frame, which carries higher fire risk. Larger homes cost more to rebuild, so square footage affects the premium directly.
• Safety and Security: Security systems, smoke detectors and fire extinguishers can cut premiums by reducing the likelihood of severe damage. Ask your insurer which devices qualify, because not all systems earn the same discount.
• Location: Homes in wildfire-prone, hurricane-prone or high-crime areas pay higher premiums. Location is the factor homeowners control least and the one that creates the biggest rate variation between ZIP codes.
• Your Personal Profile: A good credit record can qualify you for lower rates. Insurers treat a history of frequent claims as a signal you're more likely to file again, which raises your cost. A lapse in coverage history has the same effect.

AIG and Amica both scored 95 in our analysis, but AIG's $92 monthly premium is $25 less than Amica's $117. That $312 annual gap makes AIG the better value for homeowners who prioritize price and don't need Amica's dividend return program or replacement cost on contents by default. For homeowners eligible for USAA, its 97 score leads the table, but the military eligibility requirement takes it off the table for most buyers.

Take a look at the best home insurance companies below with their average costs.

**NOTE: The rates above are based on a policy with $250,000 in dwelling coverage, $125,000 in personal property coverage and $200,000 in liability. Although USAA has the highest MoneyGeek score, it's only available to active military, veterans and their families.

The full spread across all 15 insurers we analyzed runs from $92 to $467 per month for the same $250,000 dwelling coverage. That means the most expensive option costs more than five times the cheapest; a gap that has nothing to do with your home and everything to do with which insurer you pick. Don't choose based on brand recognition alone. Compare at least three quotes using the same coverage levels.

You can’t purchase hazard insurance on its own; it’s built into a standard homeowners insurance policy. To get coverage, you’ll need to shop for homeowners insurance and make sure the dwelling coverage portion meets your needs.

Your hazard insurance should cover the full cost to rebuild your home's structure from the ground up, not your home's market value or purchase price. Rebuilding costs depend on local labor rates, construction materials and your home's square footage. A 2,000-square-foot home in an area where rebuilding runs $150 per square foot needs at least $300,000 in dwelling coverage. If your current Coverage A limit is below your estimated rebuilding cost, you're underinsured and would pay the difference out of pocket after a total loss.

Your mortgage lender will also set minimum hazard coverage requirements to safeguard their investment. Lenders usually require enough coverage to rebuild the home in case of a total loss. But lender minimums are a floor, not a recommendation; they protect the loan balance, but not the full rebuilding cost. Review your dwelling coverage limit every two to three years, because construction costs shift, and a limit that was adequate when you bought your home may fall short today.

Hazard insurance, also known as dwelling coverage, is the part of homeowners insurance that protects your home’s structure against risks like fire, wind or vandalism. It doesn’t cover every event, with common exclusions including floods, earthquakes and normal wear and tear. 

The most important takeaway from our analysis: insurer choice drives more cost variation than almost any other factor. The $375 monthly gap between the cheapest and most expensive insurer at the $250,000 dwelling tier means homeowners who don't compare quotes may overpay by thousands per year for identical coverage. 

Start by estimating your rebuilding cost, set your dwelling coverage to match it, then compare at least three quotes at that coverage level. If you're eligible for USAA, include it. If not, AIG's combination of low price and high MoneyGeek score makes it the starting point for most homeowners.

Hazard insurance and homeowners insurance are often used interchangeably, but they're not the same thing. These answers cover the most common points of confusion.

To rank the top home insurance companies for hazard insurance, MoneyGeek calculated a unique score for each company using premium data for companies offering service in more than 35 states on average. This data includes J.D. Power for customer service, AM Best for financial stability and Quadrant Information Services for affordability. 

MoneyGeek sourced pricing information from Quadrant Information Services to calculate the average cost of hazard insurance on both a state and national level. Using a homeowners insurance policy with $250,000 in dwelling coverage and $125,000 of personal property, the scores are on a scale of 0 to 100 on the national level.