What Is Business Hazard Insurance?

December 20, 2023
Main street showing small business properties

Determining which type of commercial insurance is right for a business can be overwhelming. While there are many types of policies to choose from, business hazard insurance can help ensure your business's longevity. Here you can learn more about business hazard insurance.


What Is Business Hazard Insurance?


Business hazard insurance, also known as “business property insurance” or “commercial property insurance,” helps protect small business owners in the event of damage to business property, typically buildings (owned or rented) as well as business equipment, caused by certain events. It can provide business owners with financial protection by covering property damage and also helps cover business interruptions caused by specified hazards.


Small business owners who own or rent space may be required by lenders or landlords to maintain small business hazard insurance to cover the physical property.


What Does Business Hazard Insurance Generally Cover?


Business owners should be aware of what business hazard insurance typically covers so they can make informed decisions about which policy will best suit their needs. While the terms, conditions and exclusions of each policy may vary, business hazard insurance policies typically cover losses to business property arising from the following events:

  • Fire, smoke, and water damage
  • Theft and vandalism
  • Hail and lightning strikes
  • Explosions or collapse
  • Automobile or aircraft damage

If certain coverages are more important than others for a business, those can be discussed with a licensed insurance agent to help find cost-effective policy options based on any specific needs. It is important to make sure the business is adequately covered.


Is Business Hazard Insurance Necessary?


Although business hazard insurance may not be required in all states, it can be an important risk mitigation tool and should be considered when exploring business insurance needs. While helping business owners protect against losses to business property, business hazard insurance also provides business interruption coverage which helps protect a business against financial losses if it is forced to shut down due to a covered event.  While the terms, conditions and exclusions of each policy may vary, business interruption coverage typically includes coverage for lost income or profits, costs to restore operations, operating expenses, loan payments and taxes.


Business Hazard Insurance vs. Homeowners Insurance


Another consideration when selecting the appropriate type of business property insurance is whether a business operates from a home office or commercial business site. If a business is operates out of a home, any homeowners insurance policy should be reviewed to determine whether business property may be covered and, if such coverage exists, whether it is sufficient or appropriate for the specific business needs. It is important to discuss coverage with the homeowners’ insurer as some carriers may require a separate business hazard policy be obtained for businesses that operate out of the home.


What Is the Difference Between Business Hazard Insurance and Commercial General Liability Insurance?


Business hazard insurance is a type of first party coverage that typically covers damage to the business owner’s commercial property resulting from specific risks or hazards, such as fire, theft, or natural disasters. Commercial general liability insurance, on the other hand, is a third-party liability policy which covers bodily injury, property damage and advertising injury caused to third parties, not the policyholder itself.


How Much Does Business Hazard Insurance Cost?


Many different factors may be considered by an insurance company when determining the premium cost for business hazard insurance.  One main factor is the value of the property itself, including the physical building, the site where it sits and any physical business assets/equipment. Another important factor is whether the policy provides for replacement cost value (also called RCV) coverage or actual cash value (also called ACV) coverage.


Replacement cost value coverage in business hazard insurance refers to the cost needed to repair or replace damaged or destroyed property with new property of the same kind and quality without any reduction for depreciation. Actual cash value coverage, on the other hand, takes into account the property's depreciation and provides coverage for the cost to repair or replace the damaged property minus depreciation for age, condition and value.  Business hazard insurance policies with actual cash value coverage are generally less expensive than those providing for replacement cost value coverage.


Do You Need Help Finding Hazard Insurance for Your Business?


Are you ready to find the right business hazard insurance policy for your business? Acrisure's licensed insurance agents specializing in business hazard insurance can help. Contact us for help finding a policy to suit your business needs or explore our other offerings and request a small business insurance quote online today.

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