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Understanding Hazard Insurance for Small Businesses

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What is Hazard Insurance?

Hazard Insurance Definition: Hazard insurance protects property from natural disasters such as hail, fire, severe storms, and other catastrophes. Each specific peril must be included in the policy for there to be coverage and compensation for a loss. 

Many people use hazard insurance interchangeably with catastrophe, but they were two separate types of policies. In most cases, hazard insurance refers to a portion of a homeowner's policy that covers the structure. In small businesses, it can be part of a commercial insurance policy called business property insurance. Catastrophe insurance is a completely separate policy.

What does Hazard Insurance Cover?

The hazard insurance portion of a business property coverage policy typically includes coverage for:

  • Fire damage
  • Hail
  • Snow, sleet, or ice
  • Lightning
  • Theft
  • Vandalism
  • Explosions
  • Power surges
  • Civil unrest or rioting

So when would you need a separate hazard insurance policy? Perils such as flooding, earthquakes, acts of terror, nuclear attacks, or damage from war are often excluded and require separate insurance policies. If you are in an area prone to these natural disasters you’ll want to consider that coverage. 

Separate Hazard Insurance Policies

Sometimes, if your business is in a state that excludes perils like earthquakes, hail, flooding, etc. from home insurance policies, you may need to get separate coverage—which is where hazard insurance comes in.

For example, if you own a beachfront business in Florida, a business insurance policy isn’t going to cover hurricanes or flooding. Likewise, if you live in California you’ll need a separate policy that covers earthquakes.

Why do business insurance and homeowners policies exclude these things? Because they’re likely to happen. An insurance company won’t cover something likely to happen in a high-risk area unless you pay for additional coverage.

The Types of “Hazard” Insurance to Consider

If you are in an area prone to these natural disasters you’ll want to consider coverage for these types of coverage. 

  • Flood Insurance: Flood insurance covers damage to your property that is caused by any sort of flooding (from ice/snow melting, flash flooding, storm surge from hurricanes). 
  • Earthquake Insurance: as the name entails, this policy covers damage to your property from the effects of an earthquake, up to the limits of your policy. 
  • Terrorism Insurance Coverage: Terrorism insurance provides similar coverage to that of property insurance for acts of terror.

When Are You Required to Get Hazard Insurance?

Many mortgage lenders require small business owners to obtain property insurance coverage before they can secure a loan. Likewise, if someone wants to get a mortgage for a home, they’re required to get homeowners insurance. Banks need to make sure that their investment is insured if something were to happen.

The Small Business Association requires any business owners to obtain property coverage to qualify for the Paycheck Protection Program (PPP) loan. So if you received a loan through the PPP program or are applying for the second round of funding that was just announced, you’re required to obtain general liability or business property insurance that includes hazard coverage. 

How Much Does Hazard Insurance Cost?

You want to make sure your commercial property insurance has comprehensive coverage for hazards. What can influence the cost that insurance companies charge?

  • The age of the property
  • The value of the property
  • The limits and coverage options you choose
  • Whether or not you choose full replacement cost

Consider a Business Owners' Policy

If you need to get property insurance, consider purchasing a business owners’ policy (BOP). What does a business owners' policy cover? 

  • Commercial Property Insurance: This provides coverage for your business structure, furniture, equipment, and other important documents.
  • General Liability Insurance: General liability coverage protects your business if a customer or their property is injured. It also protects you if you’re accused of libel, slander, or advertising injury. 
  • Business Interruption Insurance: If your business suffers property damage and you cannot operate while it is being repaired, business interruption insurance can cover the cost of a temporary location to operate. It can also cover lost profits, payroll, taxes, and more. 

A business owners’ policy is often a more affordable way to obtain the coverage you need to protect your business. Speak to an agent to help you assess your business insurance needs.

Get a Free Small Business Insurance Quote

Our goal at CommercialInsurance.Net is to help small and medium-sized businesses get the insurance coverage they need at an affordable price. We want the process to be quick and easy. If you’re interested in a quote, want more information, or simply have questions, complete the form at the top of the page or call us at 877-907-5267.


Additional Business Insurance Coverages To Consider: Professional Liability Insurance, Workers' Compensation Insurance, Earthquake Insurance

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