Hazard Insurance for Small Businesses

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Contributor, Benzinga
Updated: December 20, 2021

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While a disaster can be devastating for any business, small businesses have an especially difficult time recovering. Many are operating on a tight budget, and the time and costs involved in recovering from a disaster could make it impossible for a business to bounce back.

That's why it is critical for businesses to have hazard insurance. This insurance helps to cover the costs of repairing or replacing the physical structures of your business. Learn more about hazard insurance for a small business.

Compare Hazard Insurance for SMB

Who are the best small business insurance companies? Here are Benzinga’s recommendations. 

  • B2Z Insurance
    More Details
    Online Application?
    Yes
    securely through B2Z Insurance's website
    More Details

    B2Z is available in the following states: Arizona, Colorado, Georgia, Idaho, Illinois, Indiana, lowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Carolina, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin.

  • The Hartford Business Insurance
    More Details
    Same Day Coverage?
    Yes
    Online Application?
    Yes
    securely through The Hartford Business Insurance's website
    More Details
  • CoverWallet Business
    More Details
    Same Day Coverage?
    No
    Online Application?
    Yes
    securely through CoverWallet Business's website
    More Details
  • Simply Business Insurance
    More Details
    Same Day Coverage?
    Yes
    Online Application?
    Yes
    securely through Simply Business Insurance's website
    More Details

What is Hazard Insurance?

Hazard insurance helps to pay for you to repair or replace the structures of your business, like its roof, walls and flooring — if they're affected by a disaster. Rather than being sold on its own, this coverage is typically part of a commercial property insurance policy.

This coverage helps pay for damage from:

  • Fire
  • Theft
  • Lightning
  • Wind
  • Hail
  • Vandalism
  • Certain types of water damage

It's important to note that hazard insurance doesn't cover every potential disaster. Commercial property insurance policies typically won't cover damage from floods or earthquakes. If you're concerned about those risks, you'll need to purchase separate policies.

How Hazard Insurance Works

Hazard insurance helps you to repair or replace structures on your business property that are impacted by a covered event. Typically, you pay for the cost of the repairs or replacements upfront and are reimbursed for the costs according to the terms of your policy.

Policies will typically cover either the replacement cost or the actual cash value. Policies that pay for the replacement costs will reimburse you for the cost of repairing or replacing your property with comparable materials without deducting anything for depreciation.

Policies that pay for the actual cash value will reimburse you for the cost to repair or replace your property with comfortable materials minus depreciation. In other words, policies that pay actual cash value will typically reimburse you for less than policies that use replacement costs. Actual cash value policies tend to have lower premiums than replacement cost policies.

That's why it's essential to review the terms of any policy you’re considering carefully. Some small businesses might find it worthwhile to pay a little bit more in premiums for the peace of mind of knowing they'll have more coverage if a worst-case scenario occurs.

Why do I Need Hazard Insurance for my Small Business?

You need hazard insurance for your small business because it could cost thousands of dollars for you to repair damage to your business structures. That's money that a lot of small businesses don't have on hand. Add to that the costs of having to close for a few days to a few weeks or more, and the disaster could lead to your business having to close its doors permanently.

If you run your business from your home, you might be under the impression that homeowners insurance will cover you. Unfortunately, homeowners insurance is typically limited when it comes to how much it will cover in regard to your business. It may not be enough to cover business equipment like computers or your business inventory. That's why it's critical to have a commercial property insurance policy or a business owners policy, both of which include hazard insurance.

Business Hazard Insurance Coverage

Commercial property insurance policies provide hazard insurance coverage. You can buy this insurance policy on its own or buy a business owners policy, which bundles commercial property insurance, general liability insurance and business interruption insurance.

Commercial Property Insurance

Commercial property insurance covers more than just the structures of your building. It covers permanently installed fixtures and items that you use to maintain the building, like appliances. It also covers the building's contents, including personal property and inventory, and items that are in your care, like client property in your custody. 

Business Owners Policies

Business owners policies (BOPs) bundle commercial property insurance with two other types of coverage.

  • General liability insurance: This coverage helps protect you if you are sued because of bodily injury or property damage, like when a customer slips and falls or if you damage a client’s home while you're making repairs. It also helps to cover personal and advertising injury, which includes claims regarding false advertising, copyright infringement, libel and slander.
  • Business interruption insurance: This insurance helps to make up for the losses you experience while your business is temporarily closed to make repairs. It helps to make up lost income, make mortgage, rent or loan payments, pay taxes and make employee payroll.

Is Hazard Insurance Right for You?

Most small businesses should have hazard insurance as part of a commercial property insurance policy. To find the best policy, contact multiple insurance companies and review each quote carefully. Choose a policy from a reputable company that offers reasonable rates.

Frequently Asked Questions

Q
Do I need liability insurance for my small business?
A

Some types of insurance are required by law. For example, if your business has employees, you’ll need to purchase workers’ compensation insurance. Here are Benzinga’s recommendations for the best workers’ comp insurance for small businesses to help you find coverage.

In general, businesses are not required to purchase liability insurance. However, many businesses still do because the cost of a potential lawsuit can be very high. For example, if a customer falls and injures themselves in your business and can’t return to work, they could potentially sue you for lost wages. Depending on the type of work they did before their injury, this could add up significantly. Additionally, medical bills can run into the tens or hundreds of thousands of dollars.

In addition to general liability insurance, you may also need professional liability insurance. General liability insurance helps to cover you in cases of non-professional negligence. Professional liability insurance helps protect you in cases of professional negligence. For example, if an accountant miscalculated someone’s taxes and they ended up owing taxes along with fees and penalties, they could sue the accountant. Professional liability insurance helps to cover these costs. Here are Benzinga’s picks for the best professional liability insurance companies.

Q
When can I stop paying hazard insurance?
A

Like most types of insurance, you should keep your hazard insurance in place for as long as you’re running your business. If the costs are high, consider talking to other insurance providers. You could also speak to your current provider and ask if there are any strategies for lowering your insurance costs. Insurance companies decide how much to charge you based on how risky your business is. You may be able to take steps to lower your risks, which could lower your insurance costs. For example, you could install or upgrade your alarm and sprinkler systems. Your insurance company may be able to offer other suggestions for lowering your risk.