Hazard insurance might seem like it should be a type of coverage for road workers or people working at heights.
The truth: It’s a common coverage most businesses should have and in this article we’ll explain why.
Business hazard insurance: The basics
Business hazard insurance is a type of small business coverage that helps protect the owned or rented building or buildings you operate your business in. It also covers the tools, equipment, and other business-related items that you use to run your company. It can also pay for income lost because your business can’t operate due to the fact it’s unable to open as a result of something covered by your hazard insurance, such as a fire.
A more common name for hazard coverage is business property insurance.
Another way to think about it: Hazard insurance for your business is comparable to the homeowners or renters insurance you carry on your home and personal property.
Hazard insurance can help cover the costs to repair or replace your:
- Personal property
- Tools and equipment
- Accounts receivable documents
- Valuable documents, such as legal papers
- Outdoor property such as signage, lighting, and fences.
Think about it: Could you afford to pay out of pocket if:
- Someone burglarizes your business and takes all your inventory
- A windstorm tears down a sign and you must have it repaired or replaced
- Your computers are damaged because of an electrical surge and you must get them fixed or buy new ones?
The answer for most small business owners is NO. It’s the reason the majority of them get business hazard insurance.
Business hazard insurance: Do you need it if you run your business out of your home?
If you run a business out of your home, you may be wondering if you need business hazard coverage in addition to your homeowners insurance. The answer is likely YES. Your homeowners insurance only pays for harm to your home and damage to — or theft of — it’s contents that are used for personal purposes. It will not pay to repair or replace business related items or equipment if they’re damaged by a covered event or stolen. You need business hazard insurance for those things.
One more important thing: Not only will your homeowners policy not pay for damaged business assets or those stolen from your home, your home coverage could be denied if your insurer finds out you’ve been operating a business out of your home and the company wasn’t aware of it.
Business hazard insurance: Do you need it if you rent your office?
The answer is likely yes. In fact, it is likely to be required by your landlord. In this case, you will need to be listed as the “renter” in the policy. It is often referred to as business renters insurance. It is basically the same business hazard insurance policy, but you are as the renter of the physical space.
When is business hazard insurance required?
Most states do not require businesses to carry hazard insurance. Still it’s a smart idea to secure this coverage to help protect your business property. If you don’t have it, you will have to pay out of pocket for repair or replacement costs.
However, you are required to have business hazard insurance in some situations as follows:
- Getting a Small Business Administration (SBA) or other business loan. Most loan providers will require that you get business hazard coverage to be approved for a loan.
- Qualifying for a lease. Many landlords require business property insurance before they take you on as a renter.
- Borrowing to acquire a new business location or make improvements to one. Similar to a mortgage, most lenders will make you get a loan to purchase or improve business property.
Tip: It could be smart to have hazard insurance in place in case you ever need to apply for an emergency loan. You’ll need to have it to qualify and it will help prevent delays if you already have coverage in place.
Business hazard insurance: What it covers
Hazard insurance can help cover the costs to repair or replace your:
- Personal property and that of your employees if it’s damaged because of a covered event, such as a fire or weather-related emergency
- Tools and equipment whether they’re damaged or stolen
- Inventory, furniture, and computers damaged by a covered event
- Valuable documents if they’re harmed or stolen
- Outdoor items on your property such as fences, signage, and mailboxes.
If you’re not clear about what’s covered by your business hazard insurance, read your policy, speak with your business insurance agent or a rep at your business insurance company.
Hazard insurance helps cover property losses related to:
- Weather events including lightening, wind, blizzards, and hailstorms
- Protests and riots
- Power surges or outages
- And more.
In addition, if you can’t open your business because of property damage or losses covered by your policy, hazard insurance can help replace your lost income.
Additional business hazard related coverages
If your business is in a state that excludes risks from calamitous events like earthquakes, hurricanes, or flooding, from standard commercial property policies, you may need to get separate coverage.
For example, if you own a business in Florida, you may need to get separate hazard coverage for hurricane or flood related damage. Similarly, you might need to secure coverage for earthquake damage in certain parts of California.
The reason these things aren’t covered on standard policies is because they’re very likely to happen and repairs related to them are costly, so you need to pay significantly more for protection.
Some common disaster policies include:
- Flood insurance, which covers damage to your property that’s caused by different types of flooding, such as from ice or snow melting, flash flooding, or storm surges from hurricanes.
- Earthquake insurance, which covers damage to your property from the effects of an earthquake.
- Terrorism insurance, which protects against damage resulting from acts of terror.
A business insurance expert familiar with the perils you face in your area can advise you on the coverages that could make sense for you.
Business hazard insurance: The cost for coverage
Small businesses pay $60-$90 a month, or $720 – $1,080 a year for the business hazard insurance coverage. Premium costs for business property coverage can vary significantly because they’re based on so many factors including:
- The age and value of the property
- Number of properties covered
- The contents of your property
- Where your property is located
- Your business type and industry
- The limits and coverage options you choose
- Whether or not you choose full or partial replacement cost
- And more.
What’s important is that you get quotes from multiple providers so you can compare coverages and costs to get the best and most cost effective hazard insurance package for your business.
Learn more at how much business hazard insurance costs.
Where small businesses can find business hazard insurance?
The good news is that many insurance companies offer business hazard insurance coverage to small businesses. You can choose to buy the coverage from established insurance companies like the Hartford or Liberty Mutual; or from insurtech startups like Next or Huckleberry; or get and compare several quotes with digital brokers like CoverWallet, Policy Sweet, or Simply Business.
Learn more at our guide to the best business hazard insurance companies for small businesses.
How can I find cheap business hazard insurance?
Here are some tips to help you find the coverage you need at a fair price:
- Shop around for the best value. Get quotes from a few companies or compare the multiple quotes generated by online insurance marketplaces.
- Don’t stop shopping around. Make sure you get new quotes before you renew your policy.
- Take advantage of discounts. If they’re not offered to you when getting a quote, ask about them, whether you’re buying online or through an agent.
Taking these steps will help ensure you’re not paying too much for your business hazard coverage.
In the end, you need to ask yourself: Can your business afford to NOT have hazard insurance?