Commercial Property Insurance
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Small business hazard insurance

Business hazard insurance, also known as business property insurance or business contents coverage, is a type of business insurance coverage that insures against the damage and theft of business property. It’s often required by landlords and lenders.

Why is hazard insurance important for a business?

Business hazard insurance offers financial coverage for your building and business personal property (BPP) in the event that it is lost, stolen, or damaged.

Business personal property includes items you need to run your business, such as tools, office supplies, furniture, electronics, inventory, heavy equipment, and machinery.

This coverage is typically included in commercial property insurance. If you run your business out of your home, your homeowner’s insurance is unlikely to cover a loss of business property.

What does hazard insurance cover?

Business hazard insurance covers the property damage or loss of business property from several types of risks, including:

  • Fire and explosions
  • Power surges and outages
  • Vandalism and theft
  • Riots and civil unrest
  • Weather events and natural disasters, such as snow, lightning, wind and hail

Some weather events might not be covered in certain high-risk areas. Damage from floods and hurricanes, for example, is typically excluded in areas with high risk.

Be sure to check your hazard coverage to see the types of covered events included in your policy. If there are exclusions for certain hazards, your insurance company might be willing to include them as additional coverage endorsements to your policy. You would likely have to buy flood insurance separately.

How much does business hazard insurance cost?

A small business owner calculating their commercial property insurance costs

For Insureon customers, the average cost of commercial property coverage is $67 per month, or $800 per year.

Within Insureon, over a third (35%) of our small business insurance customers pay less than $50 per month, while just over a quarter (27%) pay between $50 and $100 per month.

The cost primarily depends on the value of your business property.

What determines the cost of hazard insurance for a business?

The cost of business hazard insurance is contained within your commercial property insurance. A hazard insurance policy premium depends on factors such as the size and age of the building, the location, as well as the cost of business equipment and inventories.

Many small business owners save money on insurance with a business owner's policy (BOP). It combines commercial property insurance and general liability insurance into one bundle, and is usually less expensive than buying each policy separately.

Higher risk industries and those who aren't eligible for a BOP can save money with a commercial package policy. Like a BOP, it combines commercial property coverage with general liability insurance, but it allows for more coverage options and higher policy limits.

You could also save money on business hazard insurance if your property has a security system, a fire alarm, and other fire protection systems.

Who needs small business hazard insurance?

Any small business owner who owns or rents a business property should consider business hazard insurance.

Businesses that could especially benefit from business hazard insurance coverage include:

  • Manufacturers that have expensive equipment and machinery that would need to be replaced if damaged or destroyed

  • Wholesalers and distribution businesses that deal with large amounts of freight and inventory that could be damaged or stolen

  • Retailers who are susceptible to inventory loss from fire, theft, and other business hazards

  • Restaurants that face risks from food spoilage, fire, and other mishaps

Sole proprietors and those with a home-based business may also need a property insurance policy if they face risks like theft, fire damage, or similar losses.

If you already have this coverage, it’s a good idea to read over your policy to make sure it adequately protects your business. You should consider the types of risks you’re likely to face, and make sure you’re covered for each of them.

It’s also a good idea to routinely take stock of your business property, what it would cost to replace these items, and if your hazard insurance coverage is high enough to offset those losses. You may want to add business interruption insurance to offset costs if a fire or other property claim forces your business to temporarily close.

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What options do I have for commercial hazard insurance?

One key consideration in protecting your business is whether your policy will cover damage for the replacement value or the actual cash value of your property. Replacement value covers the cost of buying brand-new items for your business property losses. Actual cash value pays for a loss based on each item’s depreciated value.

You also have the option of choosing coverage for open perils or named perils. A policy that covers open perils is more expensive but covers all losses apart from those specifically excluded by the policy. Named perils coverage is less expensive but only covers losses specifically named in the policy.

What is the difference between hazard insurance and liability insurance?

Business hazard insurance covers you for financial losses from damaged or stolen business property. Liability insurance offers financial protection from lawsuits over accidents and damage to property that belongs a client or other third party.

If a customer has a slip-and-fall accident with a bodily injury at your business, or if you damage someone else’s property, a general liability policy would cover your legal costs.

If you have equipment or inventory that's stolen or damaged, a business hazard policy would cover your losses.

It’s worth noting that general liability and business hazard insurance are often required by commercial landlords. You might also need liability coverage and property insurance to qualify for a Small Business Administration (SBA) loan, including Economic Injury Disaster Loans (EIDLs).

How do I get small business hazard insurance?

Complete Insureon’s easy online application today to compare insurance quotes from top-rated U.S. insurance providers and find the right business property coverage. You can also consult with an insurance agent on your coverage options and the types of insurance your business needs.

Once you find the right policy for your small business, you can begin coverage and get a certificate of insurance in less than 24 hours.

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Updated: August 4, 2023
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