Imagine that you’ve had an offer accepted on the house of your dreams and you think you’re ready to close. Suddenly, your lender demands to see proof that you have hazard insurance.

What do you do? You knew that you would have to get homeowners insurance as part of the mortgage closing process, but hazard insurance too?

Don’t worry. Chances are, you’re already covered.

What is hazard insurance?

Hazard insurance is part of your homeowners insurance policy. It covers damage to the physical structure of your house caused by a hazard such as fire or hail, and it doesn’t require separate coverage.

Lenders typically use the term “hazard insurance” to refer to coverage specifically for the physical structure of your house. They want to ensure that their investment is protected, so they will often require you to have certain amounts of coverage before approving your loan.

» MORE: What is the average cost of homeowners insurance?

What does hazard insurance cover?

Hazard insurance pays for damage to your home caused by a named peril. The number of perils covered varies depending on your policy and typically includes:

  • Fire or lightning.
  • Windstorm or hail.
  • Vandalism.
  • Theft.
  • Smoke.
  • Explosions.
  • Riots.
  • Damage from aircraft.
  • Damage caused by vehicles.
  • Volcanic eruptions.
  • Falling objects.
  • Weight of ice, snow and sleet.
  • Water overflow or discharge from household systems like plumbing, air conditioning and appliances.
  • Freezing of those same household systems.
  • Sudden damage from a power surge.
  • Sudden tearing, cracking or bulging of a hot water system, steam system, air conditioning or fire-protective system.

Importantly, there are several types of peril that hazard insurance doesn’t pay for. Coverage for these disasters has to be purchased separately:

  • Flood.
  • Earthquake.
  • Maintenance damage.
  • Sewer backup.

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How much does hazard insurance cost?

Because it is part of your homeowners insurance coverage, hazard insurance doesn’t cost extra if you already have a standard policy. When it comes to the cost of your home insurance policy, factors such as the size of your insurance deductible, the cost to rebuild the home and the total amount of coverage all affect your premium.

Adding coverage for perils not typically included in a homeowners policy — such as flooding or earthquakes — will also cost extra. To make sure you’re getting the best home insurance quotes, shop around and compare prices between companies.