What Doesn’t Hazard Insurance Cover?
While your policy will explain what all is covered, it should also list what isn’t. Think back to the cake; any extras you want like frosting or sprinkles need to be added on top of the cake.
Sticking with the cake metaphor, the good news is that most insurance providers will let you buy extras for your cake. Let’s look at what those extra might be.
If you have other structures on your property, like a garage, shed, or barn, your hazard insurance policy will not apply to them.
Don’t overlook the potential cost of replacing an entire barn, detached garage, or shed. Thankfully, you can add these items pretty easily. You just need additional structure coverage. Many policies provide coverage for additional structures at a rate of ten percent of the limits for hazard insurance.
Hazard insurance applies to the physical structure of your primary residence and its fixtures, but it does not apply to your goods. And who doesn’t want their personal goods protected?
For that, you need personal property coverage.
Personal property coverage protects your personal belongings or the items within your home, something particularly important if you don’t live in a gated community with round the clock surveillance, and, in my experience, even if you do. Usually, your coverage is a percentage of your hazard insurance amount. The average rate is fifty percent.
Loss of Use
Hazard insurance might cover repairing your home after damages, but if you cannot live in your home while the repairs are being made, hazard insurance will not cover the cost. Let’s say you own a home in California and have basic hazard insurance. A fire comes through your town and burns part of your home.
Your hazard insurance would cover the cost of repairs, but it wouldn’t cover the cost of living while those repairs are happening.
Don’t let that happen to you. Consider loss of use coverage.
To be clear, with loss of use coverage, you will likely need to have some way of paying for hotels and food out of pocket (or on a credit card) up front, but your insurance will reimburse you so long as you keep all your receipts.
The wording in each policy will differ but generally includes expenses such as:
- Storage for household goods.
Hazard insurance does not apply to any costs incurred because of injury on your property.
Let’s say you hosted a dinner party and your friend had an accident, resulting in an emergency room visit and sprained wrist. Without personal liability coverage, your friend can sue you for their emergency room visit and medical costs. They can also take you to court for pain and suffering.
If you get sued and don’t have personal liability coverage, you might be on the hook for those costs out of pocket.
If you have personal liability coverage, it would apply to damages and legal defenses. Each policy will differ in terms of what is protected and excluded but each policy will give you peace of mind.
This section works in tandem with personal liability and provides medical coverage for anyone injured on your property accidentally. This only applies to medical expenses, not legal defense, lawsuits, or damages.
With additional medical coverage, you won’t have to pay out of pocket for the emergency room visit mentioned above.
This coverage can also be purchased as part of your homeowner’s insurance policy.
If you or someone else who resides on your property is injured, this section of your homeowner’s policy will not cover medical expenses. Many policies will also exclude coverage for any business activities you hold on your property.
Fire, Flood, or Other Natural Disaster Insurance
If you live in an area prone to natural disasters, you might be required to purchase additional coverage. Under certain circumstances, your hazard insurance might not apply to specific natural disasters common in your area.
According to the Insurance Information Institute, fire and lightning damage represent the most severe insurance claims over the last four years, totaling an average of over $77,000 per claim.
Many parts of California, for example, require fire insurance which may or may not be available through your existing homeowner’s insurance provider. Property along the coast or tornado-prone areas might also be required to hold additional natural disaster coverage by mortgage lenders and banks.
These specific policies, unlike hazard insurance, can be purchased individually. However, much like the hazard insurance section of your homeowner’s policy, these apply to the primary dwelling on your property.
Still, you can add this additional coverage to a loss of use addition and know that should your kitchen and bathroom burn down, your policy will cover the repairs and the hotels.
According to US News, companies like State Farm provide multiple additional options like water backup coverage, service line coverage, and identity theft protection.
Most hazard insurance will not cover water backup resulting from a backed-up drain or an issue with your sump pump.