As a homeowner, you may already have some knowledge of hazard insurance which protects against risks like theft and fire. However, did you know that businesses also require some level of protection? Business hazard insurance functions to aid home hazard insurance by protecting the structure of your business property from unforeseen accidents such as fires.
Fire Insurance or casualty insurance, as it is commonly referred to, insures your business against damages arising from fire, storm or even vandalism. To qualify for an SBA loan (EIDL or PPP), you may need hazard insurance in place.
This blog will take you through the ins and outs of hazard insurance including what it is, its importance to your business, how and where you can find the right policy, and what are the estimates for coverage. Taking these factors into consideration can save your business from expensive damages while ensuring operations run smoothly.
What is Hazard Insurance for Business?
A Business Hazard Insurance policy will cover small businesses from accidents as well as natural disasters such as wind damage, hail, wildfires, and terrible storms. Coverage for damages inflicted by theft, power outrages and explosions, vandalism, riots, and terrorism also comes under this policy.
This insurance stops damage or theft of business property and is usually mandated by landlords and lenders which makes it also known as business property insurance or business contents coverage. For an individual to be reimbursed for their losses, every named peril on the policy must be included.
Business owners frequently mix hazard insurance and catastrophe insurance, although they are different. Unlike hazard insurance which is often bundled with commercial property insurance, catastrophe insurance is provided as an independently written policy.
Why is hazard insurance important for a business?
Should your building or business personal property (BPP) be lost, stolen, or damaged, business hazard insurance provides financial coverage.
Items you need to run your company—such as tools, office supplies, furniture, electronics, inventory, heavy equipment, machinery, and tools—are included under commercial personal property.
Usually seen in commercial property insurance is this coverage. Running your company out of your house means that your homeowner’s insurance is unlikely to cover a loss of business property.
Is Business Hazard Insurance Necessary?
While not needed in every state, company hazard insurance can be a useful risk-reducing instrument and should be taken into account while investigating corporate insurance requirements.
Business hazard insurance offers business interruption coverage, therefore shielding a company from financial losses should it be forced to close owing to a covered occurrence, even while helping business owners guard against losses to commercial property.
Although the terms, restrictions, and limitations of every policy may differ, business interruption coverage usually covers operating expenditures, loan payments, taxes, lost income or profits, and costs to restart operations.
Do SBA Loans Require Hazard Insurance?
Some SBA loans, including physical disaster loans and Economic Injury Disaster Loans, call for hazard insurance. Should your property lie in a flood plain, you will have to obtain flood insurance to be eligible for an SBA loan. If you seek any SBA loans over $500,000, you can additionally be obliged to acquire business insurance.
SBA loans are given by partner lenders, so in some situations they can call for you to obtain insurance for lesser loans. Should you have to make a claim, you might identify the lender as a loss payee when you buy the insurance, therefore enabling them to recover any insurance reimbursements.
Fortunately, the SBA could take into account the insurance premiums you pay as part of your loan payment, therefore lowering your loan balance.
What Does Business Hazard Insurance Cover?
In case of unexpected events like theft, fire, or a natural disaster, a business is also susceptible to physical loss and damage to its property. Business hazard insurance covers an array of tools and equipment needed to run the business, including fencing and lighting tools.
Bad weather floods and unbearable hurricanes put certain regions at high risk; however, business hazard insurance takes them into account. Furthermore, businesses receive protection from theft and loss of furniture and appliances. Damage caused by sprinkler systems is also included in hazard insurance.
Since the claim cannot be processed if a business is closed due to damages, lost income is compensated as well. Business owners are advised to go over their policies every so often to analyze the risks they wish to cover. They also get the option to buy extra coverage if required which includes paying for flood damages separately.
Where Can You Get Hazard Insurance?
Most companies of business insurance will provide hazard insurance plans. Still, most people refer to them as business property insurance. Many insurance firms let you peruse policies and make purchases online. See your lender to find out exactly what coverage your property insurance needs. Since company insurance policies can get confusing, it’s also a good idea to utilize an insurance broker to assist direct your decision-making process.
What is Not Covered by Business Hazard Insurance?
Coverage for equipment breakdowns: Should a machine break down and cause production delays, that is not covered. Hazard coverage would apply, though, should a tornado or strong weather cause a tree to fall on the building and damage the equipment.
Business interruption insurance helps you guard against production losses brought on by malfunctions. For instance, your own car is parked at the entry and a windstorm breaks a tree that falls on it. Your auto policy would address it. Should a corporate car be used, it would be covered.
Medical bills, bodily injuries caused by clients or guests, and injuries sustained on your premises. Damage or injuries your goods or services cause. You will so need professional liability insurance. Many times, that kind of insurance is known as Errors and Omissions insurance.
Any “unnamed” danger? Your company hazard insurance coverage will list specific risks. Should an event, hazard, or natural disaster strike not be mentioned in your insurance, you will not be insured.
How to Choose the Right Hazard Insurance Company for Your Business
First, find out whether hazard coverage is included in your current commercial property insurance by phoning your insurer. If not, evaluate hazards such floods, earthquakes, or hurricanes and look at other choices.
See experts who provide bundled plans covering property, liability, and other protections; network with other small business owners to learn about their insurance decisions. Make calls to compare insurance companies and arrange a face-to-face meeting with an agent.
Especially for commercial equipment and inventory, review policy pricing, deductibles, and coverage specifics. To make the greatest choice for your company, be sure you know if you would get replacement cost or actual cash worth.
How Much Does Business Hazard Insurance Cost?
When deciding on the rate for business hazard insurance, an insurance company could take into account several other elements. The value of the property itself—including the physical construction, the location it occupies, and any physical business assets or equipment—is mostly important.
Furthermore crucial is whether the policy offers actual cash value (also known as ACV) coverage or replacement cost value (RCV) coverage. In business hazard insurance, replacement cost value coverage is the cost required to rebuild or replace lost or damaged property with new property of the same type and quality without any decrease for depreciation.
Conversely, actual cash value coverage considers the depreciation of the property and offers coverage for the cost to repair or replace the damaged property less depreciation for age, condition and value. Usually speaking, business hazard insurance policies with actual cash value coverage are less costly than those offering replacement cost value coverage.
Conclusion: Business Hazard Insurance
Hazard insurance is another form known as perilous insurance that covers buildings and the assets of a business from disasters and losses that are beyond its control. Insurance-owned real estates are also secured from severe natural phenomenons such as storms rendering it uninhabitable vandalism and theft.
Normally, this type of coverage is not required by law, but rather, most loans and leases require it. At times, lenders will offer loans without this coverage, but business people know that the policies have limits on what they will cover.
FAQs: Business Hazard Insurance
Are Hazard And General Liability Insurance The Same?
No, general liability insurance is more about legal claims and covers third party injuries, defamation, or property damage that occurs because of the operations of the business. Hazard insurance protects the business property from specific risks such as fire, theft or damage caused by nature.
Do I Need To Purchase Hazard Insurance For My Home-based Business?
Yes, homeowners has insurance but it does not cover damage to the business equipment nor does the homeowners insurance cover personal property loss. You will most likely have to get an endorsement to your homeowners policy or a separate business hazard insurance policy.
Do Hazard Insurance Claims Cover Loss Of Business For Income?
Yes, these policies will usually contain business interruption insurance which means that if the business is temporarily closed because of a covered event, the allocated income and expenses will still be paid out.
How Do I Identify If My Business Is In A High-Risk Area?
Check with your insurance provider first to see if your business address is in a flood, hurricane, or earthquake prone area. If it is, then you may need additional coverage.
