Next Insurance

Business Hazard Insurance

A guide for small businesses

You can’t put a dollar sign on the hard work and dedication you’ve put into building your small business, but there could be a great cost to not protecting it with the right small business hazard insurance.

Consider the rising number of weather-related disasters taking place across the United States. In the last 40 years, there were 338 weather and climate disasters where damages and costs reached or exceeded $1 billion.1

Property crime rates have also spiked post-pandemic, with the number of property offenses, including thefts and robberies, increasing by around 20% in some major cities.2

While large businesses may have the capital to support losses caused by a strong storm, fire or theft, even a small inventory loss could severely set back small businesses.

That’s why it’s important to protect yourself and your business with both grassroots solutions and the right business hazard coverage.

This guide will cover:

  • What is hazard insurance for business and what does it cover?
  • SBA loan requirements for hazard insurance
  • How much does hazard business insurance cost and how to purchase it
  • Other important types of insurance for your small business

What is hazard insurance for business and what does it cover?

Hazard insurance often goes by another more common name — commercial property insurance. It can help cover financial losses if your business property is damaged by water, fire, wind or other events included in your insurance policy.

The key to understanding how it applies to your business and what it covers is to look at the types of property your business owns or rents and what accidents or disasters could impact them.

Let’s start with your business property:

  • Where does your business operate? Do you rent or own a space?
  • Do you or your staff use expensive equipment?
  • Do you sell products and maintain an inventory, including supplies?

Now consider any external acts that could cause damage to these assets. Many business hazard policies include coverage for losses due to:

  • Fire
  • Water damage (excluding flooding)
  • Wind damage
  • Snow, sleet, or ice
  • Hail
  • Theft
  • Vandalism

There are exceptions and exclusions in most hazard policies, the most common being water damage caused by floods, earthquakes and losses caused by war.

It’s important to read your policy documents closely to make sure you are getting the coverage you need to protect you from the hazards that are most likely to interfere with your business.

Replacement value vs. actual cash value

Insurers typically have two methods of providing financial help when you file a hazard insurance claim — replacement value coverage or actual cash value coverage.

Replacement value 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 of that you paid.

Actual cash value coverage will reimburse you for the value of the property that was damaged. The actual value is often less than replacing damaged property due to the depreciation of assets.

SBA requirements for hazard insurance

The U.S. Small Business Administration (SBA) can be a helpful resource for small businesses looking to secure loans.

Those loans are issued through participating lenders and are guaranteed in part by the SBA. Small businesses can use the funding for a variety of purposes, including:

  • Start-up costs
  • New equipment
  • Repairs
  • Land, real estate or business mortgages
  • Disaster relief
  • Working capital3

To obtain an SBA loan you must have the right small business insurance.

While the type of insurance required for an SBA loan depends on which loan you get, all require hazard insurance. This rule applies to loan programs, such as:

  • SBA 7(a) loans: Provide small business owners with up to $5 million in loans from SBA-approved lenders.
  • SBA 504 loans: Help promote economic development and new jobs in communities and mandate that a borrower creates one job for every $65,000 borrowed.
  • Economic Injury Disaster Loan (EIDL): Help businesses survive and recover from disasters.
  • SBA microloans: Help small businesses start up or expand with loans up to $50,000.

It is important to maintain your hazard business insurance policy throughout the life of an SBA loan while also meeting any other property requirements.

How much does hazard business insurance cost?

Like most types of insurance, there is not a one-size-fits-all hazard business plan.

How much you pay for this coverage can depend on multiple factors related to your business and the value of its property.

It’s a good idea to know the value of your business property. You might need to share that information when you get a quote for commercial property business insurance.

Learn more about commercial property insurance costs.

4 easy steps to purchasing business insurance

Historically, buying insurance has been daunting for small business owners. However, the SBA and organizations like NEXT are making it easier with fast, affordable and tailored online options.

Here are a few steps to consider when purchasing business insurance:

Understand your risks

Ask yourself questions about the types of accidents and natural disasters that could impact your business.

Consider your location and the weather typically experienced in your area along with foot traffic, vehicle traffic and crime rates.

What type of risks are you exposed to in your day-to-day operations? Do you rely on expensive equipment or inventory to do your job? Do people regularly visit your business space?

All of these components will help you create a clear picture of your hazard risk.

Shop around

Not all insurance programs are built the same. Compare insurance coverage, rates, terms 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.

Update your coverage as your business changes

Your business requirements change over time, whether caused by growth or external factors outside of our control.

If your business operations, staffing or assets change, you might need to update your business insurance coverage.

How NEXT helps small business owners

NEXT provides commercial property insurance (a.k.a. Hazard insurance) designed specifically for small businesses and self-employed entrepreneurs.

We make it easy to quickly get a quote, buy coverage and get instant access to your certificate of insurance, which can help to speed up the process as you apply for SBA loans.

Start a free quote today. It only takes about 10 minutes to get tailored options for your business.

Sources

1 National Centers for Environmental Information “Billion-Dollar Weather and Climate Disasters,” 2022.

2 New York Times “A Shift in Crime,” September 23, 2022.

3 U.S. Small Business Administration “Loans,” 2022.

Other important types of insurance for your business

Business hazard insurance can provide important protections, but it might not provide financial help for all of the risks your business faces.
Here are some other types of business insurance that small business owners purchase for more protection:
General Liability
General liability insurance

General Liability insurance can provide financial help for a wide range of risks related to injuries to non-employees and damage to property you don’t own.

For example, if a customer or client trips at your business and gets injured, general liability could help cover the medical or legal expenses.

This coverage can be bundled with commercial property insurance for a business owner’s policy, also known as a BOP.



Learn more about general liability insurance.
Workers Compensation
Workers’ Compensation insurance

Workers’ Compensation insurance can help support medical expenses and lost wages if an employee is injured on the job while also protecting the business from financial losses if the employee files a lawsuit. In fact, in many states, workers’ compensation is required as soon as you hire your first employee.



Learn more about workers’ compensation insurance.
Commercial Auto
Commercial Auto insurance

Commercial Auto insurance can help cover the cost of property damage or injuries after an accident if you or your employees use vehicles in your business. It can also help cover the cost of towing or renting a vehicle while yours is out of commission.



Learn more about commercial auto insurance.
Errors & Omissions
Professional Liability insurance

Professional Liability insurance can help protect your business against accusations of professional mistakes or negligence.



Learn more about professional liability insurance.
Product Liability
Product liability insurance

Product Liability insurance can help protect a retail or e-commerce business if a product your business sells causes an injury, illness or property damage. This coverage can be added to NEXT general liability policies for some businesses.



Learn more about product liability insurance.

There’s a lot to love about NEXT

Business insurance in less than 10 minutes

Get insurance in less than 10 minutes and you can save up to 25% in discounts*

Tailored business insurance

Unique, flexible coverage with easy monthly payments

Get business insurance online

Do it all 100% online or talk to a licensed U.S.-based advisor

Let’s find the coverage you need for your business

Business insurance is divided into different policies. We offer seven types so it's easy to design the coverage that fits your business.

General Liability insurance
General Liability

Protect yourself from accidents that cause physical injury or damaged property.

Professional Liability or Error and Omissions Insurance
Professional Liability/E&O

Shield yourself from lawsuits that claim your work errors caused financial losses.

Workers' Compensation Insurance
Workers’ Compensation

Cover medical bills and lost wages if your employees have an accident at work.

Commercial Auto Insurance
Commercial Auto

Stay on the road with coverage for dents, tows and damage to someone else’s vehicle.

Tools & Equipment Insurance
Tools & Equipment

Upgrade your general liability coverage to protect any gear that’s stolen, damaged or lost.

Commercial Property Insurance
Commercial Property

Keep your building, inventory and equipment protected from fire or water damage.

Business Owner’s Policy Insurance
Business Owner’s Policy

Combine general liability and commercial property into one policy to protect your business.

Take a look at some helpful blog posts
Commercial Property Insurance: How coverage protects your business
Protect

Commercial Property Insurance: How coverage protects your business

Top 5 common commercial insurance claims and how to handle them
Grow

Top 5 common commercial insurance claims and how to handle them

Why businesses need more than one business insurance policy
Protect

Why businesses need more than one business insurance policy

* To the extent permitted by law, applicants are individually underwritten, not all applicants may qualify. Individual rates and savings vary and are subject to change. Discounts and savings are available where state laws and regulations allow, and may vary by state. Certain discounts apply to specific coverages only.
What we cover
Chat with Us

Mon – Fri | 8 a.m. – 5 p.m. CT

FacebookYoutubeLinkedinTwitter
© 2023 Next Insurance, Inc. 975 California Ave, Palo Alto, CA 94304, United States
Better Business Bureau
Issuance of coverage is subject to underwriting. Not available in all states. Please see the policy for full terms, conditions and exclusions. Coverage examples are for illustrative purposes only. Your policy documents govern, terms and exclusions apply. Coverage is dependent on actual facts and circumstances giving rise to a claim. Next Insurance, Inc. and/or its affiliates is an insurance agency licensed to sell certain insurance products and may receive compensation from insurance companies for such sales. Policy obligations are the sole responsibility of the issuing insurance company. Refer to Legal Notices section for additional information.