What Is Business Hazard Insurance? Coverage, Costs, Etc.

Team Marble
July 18, 2023
What Is Business Hazard Insurance? Coverage, Costs, Etc.What is business hazard insurance & what does it cover?

What is Business Hazard Insurance?

If you run a coffee shop, you need a few things to run your business — but one of them is certainly the shop itself. Similarly, if you run a gym, you definitely need a space for all your equipment. It wouldn’t be much of a gym without the gym space, after all! So while there’s a lot that goes into being a successful small business owner, you’ll definitely want to protect the space you run your company out of. And there’s where business hazard insurance comes in.

Business hazard insurance can help protect your company’s home base, and all the items in it. So let’s dive into what exactly business hazard insurance covers, how much it costs, and more.

What Coverage Will Your Business Get with Hazard Insurance?

Small business hazard insurance — which is also sometimes referred to as business property insurance or commercial property insurance — can cover you in the event of (deep breath - here we go!):

  • Fire
  • Smoke
  • Lightening
  • Hail
  • Wind
  • Blizzards
  • Explosions
  • Some water damage
  • Building collapse
  • Theft
  • Vandalism
  • Civil unrest/rioting

But you should confirm with your insurance company which exact hazards your policy covers. You don’t want to realize that something is considered an exclusion after it happens.

Common exclusions include flooding, earthquakes, war, acts of terrorism, and nuclear attacks. However, your agent may be able to give you a quote for additional coverage, like flood insurance.

But in the case that you suffer damage from a covered hazard and the insurance company approves your claim, you can then use the money you’re paid out to repair property damage or rebuild structures. It can also go towards replacing (another deep breath here!): 

  • Equipment
  • Machinery
  • Tools
  • Office supplies
  • Finished inventory
  • Raw materials
  • Furniture
  • Computers
  • Other damaged or stolen contents from the building

Depending on the terms of the policy, you may also be eligible to receive funds to replace personal property. Plus, you could qualify for business interruption benefits if you can’t run your company for a period of time because of the damage your property sustained.

What is the Average Cost of Hazard Insurance?

According to NEXT Insurance, business hazard insurance premiums can range from $17 - $100+ per month. However, most of their customers pay between $25-$75 monthly.

Several factors can impact hazard insurance costs, such as:

  • The value of your property: The more it’s worth, the pricier it will be to protect it.
  • The age of your building: Older structures tend to fare worse in disasters, so they cost more to insure.
  • The coverage limits you choose: The more you want the insurance to pay out in the event of a covered hazard, the higher your premium will be.
  • The deductible you set: If you raise your deductible, your premium will generally decrease. 
  • The other coverage you have through your insurer: You may be able to save money on your business hazard insurance if you bundle it with your other policies.

Plus, you’ll have to decide if you want replacement cost coverage or actual cash value coverage. 

Actual cash value coverage is generally less expensive because it pays out the item's value when it was stolen or destroyed, factoring in depreciation. That means you won’t get much for a three-year-old laptop burnt in a fire (for example), which could make it difficult to operate your business if you can’t afford to buy a new one.

On the other hand, replacement cost coverage typically pays out enough for you to replace the item with the latest comparable model. That means it will be easier to resume operations because you won’t have to dip into other resources to get that replacement computer. But, of course, this also means that replacement cost coverage is the pricier option because it offers greater potential benefits.

Pro Tip: Your business hazard insurance premiums may be tax deductible as a company expense. You’ll want to check with your accountant to learn more.

Does Your Business Really Need Hazard Insurance?

If you operate in an area that’s high risk for natural disasters, you should consider purchasing a hazard insurance policy. For example, if you’re headquartered in Massachusetts, there’s a chance your building could sustain damage in a blizzard. Or if you own a shop in California, your business might be destroyed in a wildfire.  

When shopping around for hazard insurance, It’s also important to consider the contents of your building. If you have equipment, inventory, or supplies that would be expensive to replace, you would benefit from hazard coverage.

Plus, if you rent your building or have a mortgage on it, your landlord or lender may even require that you have a commercial property insurance policy. Afterall, the building is their investment, too. You can confirm whether that’s something you’re required to get by checking your lease or mortgage paperwork.

And one final consideration: you may need business hazard insurance to qualify for a business loan. For example, the Small Business Administration (SBA) requires collateral for Economic Injury Disaster Loans (EIDL) over $25,000. The SBA loan also mandates that you insure that collateral.

Make note: If you run a home-based business, you may not think you need hazard insurance. But the truth is, your homeowner’s insurance policy likely only covers a small amount (often only up to $2,500). If you need more protection than that, you could ask your current insurance provider to add a special endorsement to your homeowners policy. However, it may be wise to get a separate policy for your company to ensure you have adequate property coverage. And it doesn’t have to break the bank! According to the Insurance Information Institute (III), you can insure $10,000 worth of business property and get $1,000,000 in general liability insurance for less than $300 per year.

Pro Tip: A business owner’s policy (BOP) can be an affordable way to protect your business from financial losses. This policy typically includes general liability coverage and commercial property insurance.

Keep Your Business Safe from Harm with Marble

A business hazard policy can keep the shop in your coffee shop, the store in your book store, and the gym in, well, in your gym. If the building your business is run from is damaged, you’ll want commercial insurance, like a hazard policy, to help you recover and rebuild.

And with Marble, we’re here to make getting and managing commercial insurance easier for small business owners like you. Whether it’s your first time buying a policy or you’re switching insurance companies, the process is easy in the Marble Marketplace. So create your account today to get insurance quotes and compare your coverage options — all while earning rewards just for having insurance!

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