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Hazard Insurance for Small Business: Everything You Need to Know

Learn how business hazard insurance can protect your property and business assets and why you need it for peace of mind

Show small business setting, for a restaurant. Something that depicts overhead costs/equipment costs.
December 19, 2022
Kathleen Crampton
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Reading time about 6 min

Starting a small business is a thrilling adventure. But it’s also a minefield of less-than-thrilling minutia. Don’t let small details like, what type of insurance you need or if your loan requires insurance coverage, curb your excitement. We’re here to answer questions about hazard insurance for small businesses with our helpful guide.

What Is Business Hazard Insurance?

Inventory, property rental, and equipment are just some examples of the typical small business start-up costs an owner will encounter along the way as they build their business. These costs are all investments, and ensuring their value is important. That’s where business hazard insurance comes into play.

Hazard insurance for small businesses is essentially business property insurance, covering your rented or owned business space, as well as business-related items inside it, from … wait for it … hazards.

Though business hazard insurance is the commonly known term, when you’re searching for this type of insurance, you’ll probably see “commercial property insurance” pop up as the official term. It’s also worth noting that other types of insurance, like homeowners insurance for example, have hazard insurance built into their larger policies.

What Does Business Hazard Insurance Cover?

Think of hazard insurance for small business like your homeowner’s or renter’s insurance. Just as your homeowner’s insurance covers your property and the belongings inside it, your business’s hazard insurance covers things like vandalism, theft, fire, wind, rain, and other weather events. If these “hazards,” or events, cause damage or loss to your business property and related items, your hazard insurance kicks in to help cover the cost to repair or replace them.

Hazard insurance can also cover the loss of income if any of these damages hit hard enough to impact operations. For example, if a fire broke out in your restaurant and you had to close for a few weeks while repairs were made, hazard insurance would help replace the potential income lost during this time.

Boarded up business

What Does Business Hazard Insurance Not Cover?

Your hazard insurance for business may not cover damage caused by certain natural disasters like floods. Be sure to check your specific policy to see if this coverage is included.

Here are some other features that hazard insurance for small businesses may not cover:

  • Liability. It's important to remember that business hazard insurance does not cover liability. There is another type of policy called “business owner’s policy,” which is a combination of commercial property insurance and liability insurance. With this policy, you’ll get the benefits of business property insurance as well as protection from claims made against your business or bodily injury. This is especially helpful if you have a business where clients or customers come to your home or brick-and-mortar space.
  • Business vehicles. If you use a vehicle for your business, your hazard insurance will not cover damages to it as part of the policy. While your personal automobile insurance might cover your business vehicle, it may be helpful to look into commercial vehicle insurance to make sure you’re fully protected.

Do I Need Business Hazard Insurance?

If you’re renting a business space, your landlord might require you to have business hazard insurance, but it’s typically not required by state law, unless you have a loan through the Small Business Association (SBA). The SBA requires business hazard insurance because you need to list your business property and its assets as collateral in order to obtain the loan. They want proof that these items are covered in case of a hazardous event.

However, it’s a good idea to get a policy even if you don’t have a small business loan. Why? The short answer is accidents happen. You have a homeowner’s insurance policy for your house and auto insurance for your car, so it makes sense to protect your business space and assets, too.

If you operate one of the 15 million U.S. businesses based at home, you’re likely wondering if you need business hazard insurance. Consider the type of business and equipment you have. Do you have a lot of equipment or products that would be expensive to replace? Would damage to the property or the equipment cause loss of income? If you answered “yes” to these questions, it might be beneficial to have business property insurance.

However, if you run a business out of your home that only includes a computer and other small office-related items, you could check if your homeowner’s insurance policy already covers them. If not, ask your insurance company if you can add in-home business insurance to your policy. This is sometimes referred to as a policy endorsement.

Small business owner working from home

What Factors Affect the Cost of Hazard Insurance for Small Business?

We know that savvy small business owners like to know about costs. However, this information is difficult to provide because insurance premiums are largely dependent on each business. Property insurance costs for a small graphic design business may be vastly different from those of a restaurant.

With that said, the cost of business property insurance depends on the following factors:

  • The total value (and the types) of the items you need to be covered
  • Where your business is located
  • The size of the property
  • Safety and security features of the property

Another important factor to consider is replacement value vs. actual cash value. If you choose a replacement value policy, the insurance company will pay for the cost to repair or replace the insured item at its current value (meaning how much you pay for the new item).

Actual cash value means that you’ll get paid for the cost of the item with depreciation factored in. Replacement value policy premiums typically cost more than actual cash value policies. To learn more about how much business insurance costs, check out one of the insurance providers in your area and ask for a quote either online or over the phone.

What Are Some Business Hazard Insurance Providers?

Most large insurance companies offer hazard insurance for small business owners. Here are some popular providers:

No matter which insurance company you pick, it’s important to evaluate your coverage each year. You’re looking for any gaps in coverage and should continually compare premium prices.


Before getting SBA hazard insurance, decide what you need covered and consider all factors that may affect the cost. Compare quotes from insurance companies or hire a licensed insurance agent to help you navigate the various policies out there.

Yes, hazard insurance is the same as business property insurance, and it’s also called commercial property insurance. The term “hazard insurance” is commonly used because the policy provides coverage for certain hazards.

Yes, SBA loans require insurance to make sure that your business property and its assets are protected. Because business property and its assets are listed as collateral for the loan, they need to be covered in case of a hazardous event.

The COVID-19 Economic Injury Disaster Loan (EIDL) requires hazard insurance for your small business because it is offered through the Small Business Association, which requires this type of insurance for all its loans. Learn more about EIDL and its requirements.

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