What is Hazard Insurance?

By Karina C. Hernandez - Updated February 23, 2018
House in bad summer thunderstorm

Owning a home is a major financial investment for homeowners and lenders alike. As such, a lender requires you to obtain a hazard insurance policy as a condition of financing. Hazard insurance is the portion of a homeowners insurance policy that protects you against losses when your home's structure is damaged. In areas where certain catastrophes are more common, your insurance provider may charge more to cover disasters such as earthquakes, wildfires and hurricanes.

Tip

Hazard insurance is the portion of a homeowners insurance policy that protects you against losses from fire, smoke, vandalism and certain inclement weather.

Hazard Insurance Is Part of Homeowners Insurance

The terms "hazard"and "homeowners" are often referred to interchangeably when real estate lenders discuss insurance for your home. Hazard insurance is purchased as part of a homeowners insurance policy and and may also be referred to as dwelling coverage. If you finance a home through a mortgage company, you must have a homeowners insurance policy that meets your mortgage lender's minimum requirements. One of the requirements is that your homeowners policy include a certain amount of hazard insurance coverage. The hazard insurance portion of your homeowners insurance policy covers the structure itself rather than the land or the property within. It doesn't protect you from lawsuits from injured guests as the liability coverage of a homeowners policy.

What Hazard Insurance Covers

The hazard insurance portion of your homeowners policy protects you against losses caused by certain inclement weather, fire, smoke, theft and vandalism. A standard homeowners policy without hazard insurance may not reimburse you if your house burned down or was severely damaged by smoke or a hail storm. Since some hazards are more prevalent than others, depending on where you are located, insurance providers do not include coverage for the most common hazards in a standard homeowner policy. Instead, you must purchase additional hazard insurance for certain events that your home is prone to, such as tropical storms and hurricanes for homes located near the beach, earthquake coverage for homes near fault lines, and wildfire and flood insurance for homes in areas with high fire risk or in flood zones.

Hazard Insurance is not Tax Deductible

As of the time of publication, you cannot deduct the cost of hazard insurance premiums. The IRS considers homeowners – and subsequently, hazard insurance – as a "regular" living cost, which you must pay out of pocket. U.S. tax regulations essentially treat homeowners insurance an expense like food and clothing, rather than a housing cost such as real estate taxe and mortgage interest.

The only circumstances under which you may deduct hazard insurance are if your home is used as a rental property, a home office or business. Landlords with rental income from a home may be able to deduct a portion of the homeowners insurance premium as a business expense. The deduction amount is based on the portion of the home that is used for rental purposes. Likewise, if the home is used for business purposes, such as a home office, the amount you can deduct is based on the square footage of the home that is used for business purposes. You must itemize your tax return to claim the rental or home-business deductions.

About the Author

Karina C. Hernandez is a real estate agent in San Diego. She has written real estate articles for multiple internet channels over the past 10 years. She has a B.A. in English from UCLA.

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