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For Your Small Business May 20, 2022

Do You Need Business Hazard Insurance?

You might be surprised and unhappy to learn that hazard insurance is not included in your existing business insurance policies. Business hazard insurance may be included as part of your commercial property insurance. If you have a mortgage, most likely getting business hazard insurance was a requirement. Check the specifics of your policies with your insurance company.

What is Hazard Insurance for Business?

A hazard insurance policy protects small businesses against accidents.

Accidents can include natural disasters such as those caused by wind damage or wildfire. Hazard insurance can also protect you from related damages, such as losses incurred due to loss of electricity, explosion, theft, rioting, and vandalism.

Benefits of a Hazard Insurance Policy for Small Businesses

If you own a business property, your worries don't end when you lock the doors. Business insurance should cover you for things – like accidents – that are beyond your control. That's where hazard insurance cost is worth its benefits:

  1. Peace of mind
  2. Protection of business property
  3. Protection against natural disasters
  4. Ability to recoup the business property damages due to looting and vandalism
  5. Financial protection – Through the insurance company, less time to wait before being reimbursed.

How to Find Out if You Already Have Hazard Insurance

Hazard insurance may be included within existing policies. Check your commercial property insurance policy and/o your business property insurance.

If you work from home, check your homeowner's insurance to see if it includes hazard insurance. You'll still need to carry general liability insurance, in addition to your homeowner's insurance. You may need to add hazard insurance if your homeowner's insurance doesn't include it.

What Is Covered by Small Business Hazard Insurance?

What does business hazard insurance typically cover? Business insurance coverages with a hazard policy include:

  1. Equipment repair and replacement costs – Coverage can include damages caused by building collapse or interior flooding due to hurricanes.
  2. Property damage – Coverage can include repairs to the building exterior and entryways.
  3. Inventory damage – Inventory can include finished products, such as clothing, as well as the materials to make the products.
  4. Damage to outdoor landscaping, including fencing and lighting.
  5. Lost income – if you can't open your business due to damages, you may be able to make a claim to recover financial losses.

What Is Not Covered by Business Hazard Insurance?

  1. Equipment breakdown coverage – If a machine breaks down and you lose production time, that is not covered. If a tornado or severe windstorm causes a tree to fall on the building, and it crushes the machine, hazard coverage applies. To cover breakdowns, you can get business interruption insurance.
  2. Damages to personal property. For example, your personal vehicle is parked at the entrance and a windstorm causes a tree to break and fall on the vehicle. Your personal auto policy would cover that. If it's a business vehicle, it would be covered.
  3. Injuries sustained on your property, bodily injury suffered by clients or visitors, and ensuring medical bills.
  4. Injuries or damages caused by your products or services. For that, you'll need professional liability insurance. That type of insurance is often called Errors and Omissions insurance.
  5. Any hazards "not named." Your business insurance hazard policy will name hazards. If a hazard/accident/natural disaster occurs which is not named, you aren't covered.

How Much Does Hazard Insurance Cost?

When you begin to shop with an insurance company, you'll be pleased to learn that hazard coverage isn't very expensive. As a ballpark, you can expect to pay about $60 a month, with a $1,000 deductible and a $60,000 claim payment limit.

The cost will be higher if you live in a high-hazard area, such as a coastal area.

How to Choose the Right Hazard Insurance Company for Your Business

As previously stated, start your research with a call to your insurance company. See if you already have hazard insurance through your existing business property insurance. Business owners need hazard insurance, and often have enough through existing policies.

If you don't have hazard insurance coverage, start a list:

  1. Analyze your risks, such as hurricane, earthquake, and/or flood insurance.
  2. Through area business organization, network with other small business owners. Find out how they handle this issue, and which insurance company they use.
  3. Seek insurance advice. You may find a small business insurance specialist who bundles commercial property insurance with general liability coverage, workers compensation insurance, property coverage (including business equipment), business owner's policies, cyber insurance, professional negligence, and other types of business insurance.
  4. With just a phone call, you can shop amongst insurance providers and find your best fit.
  5. Meet the insurance agent in person. The property insurance coverage is important – a responsive agent is just as important.
  6. Analyze the policies offered, comparing costs involved such as deductibles. Also, pay close attention to how loss or damage to business equipment and/or inventory is covered – would be receive the actual cash value or the replacement cost?

How to Get Hazard Insurance

If you shop online, you can use tools to easily compare insurance policies. With the policy's benefits and costs displayed side by side, you can more easily choose the right coverage as a small business owner.

Check with multiple, well-known providers such as State Farm, Nationwide, Travelers, Allstate, and Farmers. With just a few clicks, you can check the specifics of what each company offers.

Is Hazard Insurance the Same as Commercial Property Insurance?

No, it's not the same. It may be included within a commercial property insurance policy, or you may need additional coverage.

Is Hazard Insurance Essential?

Yes. You can't predict or prevent an accident or natural disaster. As your business grows, you'll have more reasons to add Hazard coverage options.

If you're applying for a mortgage or leasing business property, often hazard insurance will be required. You can add it to your business owner's policy.

 

This article was written by Lisa Price from Small Business Trends and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.

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