Do You Have Hazard Insurance for Your Small Business?

Business hazard insurance covers a company’s equipment, building and inventory if they are damaged from catastrophic hazards like fires or windstorms. While you can typically purchase this policy independently, purchasing it as part of a robust commercial policy, such as a business owners policy, can help you reduce overall costs while getting other essential commercial insurance coverages.

Keep reading to learn more about business hazard insurance, what it covers and what factors contribute to your insurance rates.

On This Page

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  What Is Hazard Insurance for Small Businesses?

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  How Does Business Hazard Insurance Work?

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  What Does Business Hazard Insurance Cover?

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  How Much Does Business Hazard Insurance Cost?

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  Do I Need Hazard Insurance if I Run My Small Business From Home?

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  What Types of Insurance Should I Consider for My Small Business?

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  How Can I Get Hazard Insurance?

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  FAQs

What Is Hazard Insurance for Small Businesses?

Business hazard insurance, also called commercial property insurance, is insurance for business owners that covers commercial property (e.g., office building, machinery, inventory, etc.) against various hazards. Covered physical hazards are often weather-related, like fires, windstorms and hail, but can include theft, vandalism and more. However, some types of hazards, such as floods, may be excluded.

How Does Business Hazard Insurance Work?

Once a hazard occurs, you’ll want to take stock of everything lost and file a claim with evidence. Don’t wait too long, which could prolong the claims process. The extent of your coverage will depend on your policy. Similar to a home or auto insurance policy, a commercial policy is subject to limits (how much your insurance will pay for a covered loss) and exclusions (losses your insurer will not cover).

Business hazard insurance can be purchased as a separate policy or bundled into another type of commercial policy.

For example, some businesses may be able to purchase hazard coverage through a business owners policy (BOP), which combines this coverage alongside general liability and business interruption. When purchasing hazard insurance, you can choose between named peril coverage or open peril coverage, which we’ll cover more below.

Named Peril

Named peril coverage will insure your commercial property against only the perils listed in your policy — this will typically include damage from fires, lightning, wind and explosions. If the peril is not listed in your hazard policy, you will not be covered for losses caused by that peril.

Named peril coverage is typically more limited when compared to open peril coverage, but it is usually cheaper. You can purchase hazard insurance for perils specific to your needs. For example, if your business is in an area with a high crime rate and is vulnerable to wildfires, you may want to add "theft" and "fire" as named perils in your policy.

Open Peril Coverage

Open peril coverage insures your commercial property against all perils EXCEPT those listed in your policy. Examples of exclusions commonly include damages from earthquakes, nuclear hazards, floods and government seizures. Open peril coverage is more comprehensive than named peril coverage, protecting commercial property from more types of risks.

Whether you have a named peril or open peril policy, insurance carriers will typically reimburse you for your losses at actual cash value, up to the coverage limits. Actual cash value is the value of an item after accounting for depreciation and is often lower than the price of a new replacement. Your policy may also allow you to choose replacement cost value for losses, which has an additional cost but will cover the cost of buying the item off the shelf today.

What Does Business Hazard Insurance Cover?

Business hazard insurance can cover all types of commercial property, including:

• Building and structures (includes the actual building structure and other structures, such as fences and gates)
• Outdoor landscaping
• Documents
• Machinery
• Equipment
• Inventory
• Fixtures
• Some personal property

What business hazard insurance protects against will depend on the company and the individual policy. However, business hazard insurance generally provides coverage for:

What Isn’t Covered?

Hazard insurance typically won’t provide coverage for the following losses:

• Earthquakes and floods (coverage requires a separate policy)
• Nuclear hazard
• Acts of terror
• Government seizures
• Intentionally caused hazards
• Liability

How Much Does Business Hazard Insurance Cost?

Business hazard insurance costs will vary between policies and companies. For example, The Hartford customers pay an average monthly premium of $140, while those at NEXT Insurance pay an average monthly premium of $45.^[1][2] Other factors that can influence your business hazard insurance rates include:

• Location: Businesses located in a higher-risk area, such as those with high theft rates or vandalism, may have higher premiums.
• Building construction: The safer a building is from experiencing hazards, such as being made of fire-resistant materials, the lower your risk, often resulting in lower rates.
• Occupancy: Generally, the more people in a building, the more likely a hazard is to occur, such as an accidental fire in a busy restaurant kitchen.
• Safety features: Ensuring your business has safety features, such as fire extinguishers, burglar alarms, and smoke detectors, helps reduce your risk of a more extensive hazard, which can lower your rates.
• Claims history: If you have a history of making claims, you may be seen as a higher risk of making one again, which could result in higher rates.
• Years in business: A long-running business can indicate lower risk, provided it has avoided making claims.

Do I Need Hazard Insurance if I Run My Small Business From Home?

You may need hazard insurance if you work from home, as your homeowners or renters insurance generally doesn’t cover commercial property losses. A kitchen counter, for example, may be covered by your homeowners insurance if it burned down in a fire, but it might not cover the designated work computer that was sitting on it.

Small business owners that work out of their home can get hazard coverage by buying a home insurance endorsement or commercial property coverage, like a business owners policy.

What Types of Insurance Should I Consider for My Small Business?

Hazard insurance covers only damages to your commercial property (business equipment, inventory, electronics). Only having business property insurance still leaves you vulnerable to liability claims and business interruption. Below are some types of commercial insurance that can supplement your hazard coverage.

• General liability insurance: Covers several types of liability claims, including those related to bodily injury, property damage, libel, slander and advertising injury.
• Product liability insurance: Covers losses due to defective products that have caused bodily injuries to a customer.
• Professional liability insurance: Covers losses related to services rendered, such as malpractice or negligence.
• Home-based business insurance: Covers commercial property and some liability for businesses based in a personal residence.
• Business interruption insurance: Covers lost income when your business operations are interrupted by a covered loss. For example, business interruption coverage would cover the cost of renting a temporary office while your normal office is being repaired after a fire.
• Business owners policy (BOP): An insurance package bundling multiple commercial coverage types, including general liability, commercial property and business interruption. However, it’s only available to small and medium businesses that meet certain requirements.

How Can I Get Hazard Insurance?

Since hazard insurance rates and coverage limits can vary between insurance companies, you’ll want to get quotes from three to five insurers. This can help you better understand your range of options. You’ll typically need to provide information about yourself and your business, including your industry and location, to each company. This information is typically given to each insurer one at a time when getting quotes, which can become a slow and tedious process.

You can speed things up by using an insurance marketplace like SmartFinancial. After answering a brief questionnaire, we’ll connect you with a licensed insurance agent to help you get the business hazard insurance policy your business needs for financial protection. Click here to get a free commercial insurance quote today!