What is business hazard insurance? Definition and meaning
Business hazard insurance is a part of commercial property insurance coverage that can help cover costs for damage to your building, equipment or inventory from named hazards — meaning a list of potential pitfalls — that could damage your property.
What can a business hazard insurance policy cover?
Coverage is usually based on the property your business owns or uses and the hazards listed in your policy. Common named hazards include:
- Fire
- Some water damage (excluding flooding)
- Wind damage
- Snow, sleet or ice
- Hail
- Theft
- Vandalism
It’s important to read your policy documents closely to make sure you are getting the coverage you need to help protect you from the hazards that are most likely to interfere with your business.
Imagine if you pick up your workspace, turn it upside down and shake it. Most things that fall out would be covered under a business hazard insurance policy, This could include things like:
- Theft of business gear from your store**
- Inventory damage
- Building structural damage, such as a broken water pipe or damaged HVAC system
- Damage to business fixtures you own such as furniture or flooring
- Equipment failure after a power outage
- Business income interruption if you have to close your business temporarily for repairs after a covered event
What’s not usually covered by business hazard insurance?
A business hazard insurance policy can cover a lot, but it doesn’t cover every type of property damage for your shop, store or office. Coverage is typically limited to the hazards listed in your policy. Certain events or losses are commonly excluded.
Some of the most common hazard insurance exclusions include:
- Flood damage, including flooding caused by heavy rain or storm surge
- Earthquakes, landslides or sinkholes
- Acts of war or terrorism
- Normal wear and tear, deterioration or poor maintenance
- Intentional damage
Because these risks aren’t usually included, businesses may need separate policies — such as flood or earthquake insurance — to help protect against them.
Is small business hazard insurance required?
Business hazard insurance isn’t always required by law for small business owners, but it may be required if.
- You own a commercial building or have a business loan. Lenders may require hazard insurance as part of the loan agreement.
- You lease your business space. Some landlords require tenants to carry hazard insurance to help protect both the building and the business property inside it.
Even when it’s not required, many small business owners opt for hazard insurance to help protect their gear and workspace from unexpected damage that could interrupt day-to-day operations.
Is business hazard insurance the same as home hazard insurance?
No, business hazard insurance and home hazard insurance aren’t the same, even though they sound similar. They’re designed for different types of property and different risks.
- Hazard insurance for the home is typically part of a homeowners insurance policy. It can help cover damage to a personal residence caused by certain hazards, such as fire or storms.
- Business hazard insurance is a type of commercial property insurance. It’s designed to help cover buildings, equipment, inventory and other property used for business purposes.
Home-based businesses may still need business hazard insurance — even if they operate out of a personal residence. Homeowners insurance typically focuses on personal property and may offer limited or no coverage for business equipment, gear or inventory.
If you use part of your home for work or store equipment or inventory there, separate commercial property coverage may help protect those assets if they’re damaged by a covered hazard.
What’s the average cost of hazard insurance for business owners?
Prices for coverage can vary, but your monthly or annual premium is typically tied to property value, location and coverage choices.
Several factors typically influence how much hazard insurance may cost for your business, including:
- The value of your business property, including your equipment, inventory, furniture, fixtures and building itself
- Your business location (plus local weather risks and crime rates)
- The types of hazards covered and the optional add-ons you choose
- Your deductible and coverage limits
- How your property is valued, such as replacement cost or actual cash value
Because coverage needs differ from one business to another, the best way to learn exactly what you’ll pay is to get a free, no obligation business hazard insurance quote for commercial property insurance.
Learn more about commercial property insurance costs.
Replacement cost coverage vs. actual cash value coverage
Hazard insurance policies typically value covered property in one of two ways: replacement cost or actual cash value.
- Replacement cost coverage can help cover your business loss by providing the cash needed to replace your damaged property. For example, if water damage destroys your work computer, replacement coverage would help cover the cost of a new computer equal to the cost you paid.
- Actual cash value coverage will reimburse you for the value of the property on the day that it was damaged. The actual value is often less than replacing damaged property due to the depreciation of assets. Business owners often choose this option to keep down the cost of their premium.
How your policy values property can affect both your premium and how much you may receive after a covered loss.
How can I get a hazard insurance quote for my business?
Getting a hazard insurance quote is easy. It takes about 10 minutes and you can do it 100% online.
When shopping around for business hazard insurance, consider these three points:
1. Understand your risks
Think about the types of accidents or natural events that could affect your business. Consider your location, typical weather patterns, foot or vehicle traffic and local crime rates.
It also helps to look at how your business operates day to day. Do you rely on expensive equipment or inventory? Do customers, vendors or employees regularly visit your space? These details help create a clearer picture of your hazard risk.
2. Shop around
Not all insurance programs are built the same. Compare insurance coverage, pricing, deductibles and benefits to find the coverage that works best for your needs.
Check out insurance provider reviews and customer support to see if it’s a company that matches your expectations for service.
3. Update your coverage as your business changes
Your business requirements change over time. If your business operations, staffing or assets change, you might need to update your business insurance coverage.
