What Does Business Hazard Insurance Cover?

Business hazard insurance can cover damage to your building, equipment and inventory from fire, storms, theft and other perils. It isn't a separate policy for most small businesses. It's the property coverage inside a commercial property policy or a business owner's policy (BOP). Lenders, including the SBA, often ask for proof of it before they approve a loan secured by business property.

What Is Business Hazard Insurance?

Business hazard insurance is the part of a property policy that can cover damage to your business property from perils like fire, hail, storms and theft. For most small businesses, it isn't a separate policy. It's the property coverage in commercial property insurance or a business owner's policy (BOP).

Policies list the perils they cover. A named-peril policy covers only the perils it lists. An open-peril policy covers everything except what it excludes.

People sometimes use hazard insurance and catastrophe insurance to mean the same thing, but they're different. Catastrophe coverage, like flood or earthquake insurance, is usually a separate policy.

Which Perils Can Business Hazard Insurance Cover?

The hazard portion of a property policy can cover damage from:

1. Fire
2. Hail
3. Snow, sleet or ice
4. Lightning
5. Theft
6. Vandalism
7. Explosions
8. Power surges
9. Civil unrest or rioting

Coverage can extend to your building, equipment, furniture and inventory, up to your policy limits.

What Isn't Covered by Business Hazard Insurance?

Most property policies exclude some perils. These usually need separate coverage:

1. Floods: Commercial flood insurance can cover damage from rising water, flash floods and storm surge.
2. Earthquakes: Commercial earthquake insurance can cover damage from earthquakes, up to your policy limits.
3. Terrorism: Terrorism insurance can cover property damage from acts of terror.
4. Wear and tear: Damage from age, rust or poor maintenance isn't covered.

In some coastal areas, wind and hail damage carry a separate deductible or need their own policy. A licensed partner can explain what your policy excludes where you operate.

Do SBA Loans Require Hazard Insurance?

Often, yes. SBA loans that are secured by business property usually require hazard insurance on that property. That can include 7(a) loans, 504 loans and disaster loans, including Economic Injury Disaster Loans (EIDLs).

Your loan authorization lists the exact requirement. Lenders commonly ask that:

1. The policy is in your business's name, including any DBA
2. Coverage is high enough for the property securing the loan
3. The lender is listed on the policy as loss payee or mortgagee
4. You keep the coverage active for the life of the loan

Check the details with your lender or the U.S. Small Business Administration. Other commercial lenders and landlords often ask for proof of property coverage too.

Is Hazard Insurance the Same as Commercial Property Insurance?

Mostly, yes. Hazard insurance is the term lenders use for the property coverage they want on their collateral. For a business, that coverage usually comes from a commercial property insurance policy or a BOP. If your lender asks for hazard insurance, a commercial property policy that covers the right perils and limits usually meets the requirement.

How Much Does Business Hazard Insurance Cost?

There's no single price. The cost depends on your property and your risk.

Common factors include:

1. The value and age of your building and equipment
2. Where you're located, including weather and crime risks
3. How the building is constructed and what your business does there
4. Safety features, like sprinklers and alarms
5. The limits, deductible and coverage options you choose
6. Whether you choose replacement cost or actual cash value

Many small businesses get hazard coverage through a BOP. For more on cost, see our business owner's policy cost guide.

Can a Business Owner's Policy Include Hazard Insurance?

Yes. A business owner's policy (BOP) bundles property coverage with other common coverages. A BOP usually includes:

1. Commercial property insurance: Can cover your building, furniture, equipment and inventory.
2. General liability insurance: Can cover third-party injury and property damage claims, plus claims of libel, slander or advertising injury.
3. Business interruption insurance: Can help replace lost income and cover costs like payroll or a temporary location while covered damage is repaired.

Many small businesses get their hazard coverage through a BOP. A licensed partner can explain whether a BOP is available for your business size and type.

How Does Tivly Match Me With a Licensed Partner?

Tivly matches small businesses with 450+ licensed partners in all 50 states. It's free to use. Complete the form at the top of the page, and a Tivly specialist will reach out to match you with a licensed partner. Or call 877-907-5267 to speak with a representative.