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    Hazard Insurance for Small Businesses

    For small businesses, having various types of business insurance could spell the difference between bankruptcy and continuity. Case in point, the Federal Emergency Management Agency (FEMA) states that 40% of small businesses do not recover from natural disasters, while 25% halt operations within 12 months. To mitigate the possible consequences, consider getting hazard insurance.

    Hazard coverage classifies as a subsection under your home insurance or business insurance policy. However, if the risk of a natural disaster is too high, your insurer might suggest getting a separate business hazard insurance policy. For example, California business owners operating along fault lines would be hard-pressed to get property coverage for earthquake damage.

    What Is Hazard Insurance For a Business?

    Hazard insurance falls under your business insurance coverage. These plans protect you from having to pay out of pocket for commercial property and asset damage caused by natural disasters. In many cases, commercial insurance already comes with some form of hazard protection. However, if the risk of a catastrophe outweighs your current coverage, you will need a separate policy.

    Coverage terms vary on a case-by-case basis. However, most policy owners can rely on their hazard insurance to cover the following assets:

    • Business tools, machinery, and equipment
    • Commercial establishment interior and exterior
    • Furniture and appliances
    • Industry-related gadgets and technology
    • Valuable files and paperwork

    Businesses that use high-value items will require higher general liability insurance coverage, thus increasing the policy premium. Of course, you can always minimize the rates by lowering the coverage amount.

    What Counts as a Hazard in Insurance Terms?

    Different insurance companies have varying guidelines on what they categorize as a hazard. They consider several factors like the applicant's industry, location, tenure, and overall insurability. But to give you an idea, most insurers define hazards as the following:

    • Fire
    • Hail
    • Lightning
    • Strong winds
    • Theft
    • Vandalism

    Several commercial insurance policies include limited protection against water damages, but flooding and earthquakes generally fall out of coverage. Although, you can still get a separate insurance policy for these incidents.

    If you're unsure what your insurance business plan classifies as a hazard, consult with a reputable advisor. Never resort to guesswork. Insurance is all about security and peace of mind, so do not shy away from clarifying jargon, queries, or concerns with your provider.

    How Much Does Business Hazard Insurance Cost?

    Your hazard insurance coverage often costs around .25% to .30% of your property's bank-appraised value. The exact numbers depend on your projected repair and replacement costs. Those who have a high-value business owners' policy can expect equally expensive premiums, while those with standard coverage can likely minimize the costs.

    However, note that hazard insurance only contributes to a subsection of your commercial insurance plan. For full protection, you will likely need the following as well:

    Workers' Compensation Insurance

    The law mandates businesses with at least one employee to secure a workers' compensation insurance policy. These protect your employees from work-related injuries and accidents.

    General Liability Insurance

    State laws do not require general liability insurance. However, having this type of business coverage can drastically support you during grave cases like personal injury lawsuits.

    For example, if a fire breaks out and traps your customers, who will pay for their recovery? Those who do not have general or personal liability would have to shoulder the charges themselves. Meanwhile, insured individuals can file a claim. The insured amount should cover everything, from the customer's hospital bills to your PR damage control expenses.

    Business Income Interruption Insurance

    Business interruption insurance coverage provides financial resources to support your recovery following a natural disaster or catastrophe. The aid can last for up to one month. Although, you can stretch the recovery period to a couple of months if you have sufficient insurance coverage.

    Which Businesses Need Hazard Insurance?

    Business owners often neglect low-probability, high-loss instances like natural catastrophes. Most would only purchase insurance on an as-needed basis—if legally mandated by the state. Unfortunately, however, disasters can strike at any time, and you can only protect yourself from these through sufficient insurance.

    Having said that, we encourage all commercial entities, from small businesses to medium-scale establishments, to consider purchasing hazard insurance. Manage your assets well so the premiums don't end up eating your profits.

    Choosing Hazard Insurance Policies

    With dozens of different business insurance providers offering hazard coverage in the country, how do you find the ideal insurance company? Sorting through several options can prove challenging for first-timers. To make things easier, our team has compiled the top commercial insurance companies that cater to small businesses:

    Best Commercial Property Insurance Provider: Travelers

    • Largest commercial property insurance provider
    • Has sites in the U.K. and Canada
    • Accommodates various businesses from 20+ different industries

    For top-notch hazard insurance solutions, check out the country's top-performing business property insurance company: Travelers. They have written more property insurance premiums than any other provider since 2019. Their tenure, experience, and popularity serve as a testament to the quality insurance solutions they guarantee.

    To maximize your policy, inquire about the other insurance products they offer. Travelers has an extensive set of insurance products ideal for multiple industries, but they excel in protecting professional service providers. In fact, they have policies that cover data loss—including both physical and digital copies.

    One minor hiccup you might encounter when comparing Travelers policies is they only disclose their rates upon consultation. They want to avoid misinterpretations as much as possible. After all, they cater to so many industries, so the rates will fluctuate on a case-by-case basis.

    Pro Tip: If you need an all-in-one insurer, explore the products that Travelers offers. The company thrives as a commercial property and hazard insurance company, but they also cater to several other industries, including retail, construction, large-scale manufacturing, transportation, and professional services.

    Most Accessible for Small Businesses: State Farm

    • A far-reaching network of capable insurance agents
    • Extensive policy add-ons, endorsements, and riders
    • Available in all 50 states
    • Offers customized insurance plans

    State Farm currently ranks among the most popular and accessible business insurance providers for commercial entities of all sizes. The company has seasoned agents spread all across the country. In fact, a quick Google search will already connect you with hundreds of tenured, enthusiastic insurance agents. No matter where you live, there's bound to be at least one agent nearby.

    Apart from accessibility, SMBs praise State Farm for their flexibility. The company offers an extensive selection of add-ons, riders, and endorsements, which you can use to revamp your current property insurance plan. Remember: hazard insurance has limited coverage. Fortunately, you can rely on add-ons to lay out specific terms and conditions that your business can benefit from.

    Having multiple agents to consult streamlines consultations and applications, but it also compromises service quality. Not every agent knows how to handle queries properly. Perhaps the best approach is to consult with several agents and see which one provides overall quality services. Remember: your agent should offer support even after the application process.

    Pro Tip: Apart from insurance, the company also has several financial and banking products. So consult with State Farm agents on how you can create a solid strategy to ensure long-term continuity and protection.

    Comprehensive General Liability Coverage: Nationwide

    • Has straightforward, comprehensive insurance packages
    • Caters to high-risk small businesses
    • Accommodates SMBs from 14+ different industries

    As mentioned, hazard insurance classifies as a subset of your commercial property insurance policy, which provides limited protection. For example, hazard insurance will reimburse damage from natural disasters. However, they will not cover your potential income loss, personal injury lawsuits, and brand reputation management following a catastrophe.

    If you need straightforward yet comprehensive general liability insurance plans, turn to Nationwide. The company was founded nearly a century ago, and they now cater to half a million businesses, companies, and enterprises of all sizes.

    SMBs often turn to Nationwide for flexible, high-risk policies. They have a lenient application process that accommodates even small-scale startups from risky industries (e.g., health care, agriculture, etc.). So if commercial banks and institutions have already turned you down, you might want to try your luck at Nationwide.

    The only downside to Nationwide is they do not cater to clients from Alaska or Hawaii.

    Ideal for SMBs and Independent Contractors: Hiscox

    • Specializes in insuring and protecting small businesses
    • Provides insurance protection in all 50 states
    • Long-running insurance company founded in the 1900s

    Hiscox stands as one of the most widely known small business insurance providers. They offer an extensive range of commercial insurance solutions tailored to suit startups, micro-businesses, and independent contractors. The company currently insures more than 300,000 SMBs.

    To better service the coverage needs of small businesses, they try to make their insurance policies as affordable as possible. In fact, they have plans starting at just $20 per month and have them insure you for up to $2 million worth of general liability.

    Apart from business property insurance, you can turn to Hiscox for general liability, cybersecurity, workers' comp, and even short-term liability as well.

    However, note that Hiscox is not a U.S.-based company, and they only have 10+ sites in the country. Fortunately, you can easily connect with them via call or email. They have a relatively responsive customer service team, so you need not have to worry about your queries going unanswered.

    Apart from insuring their commercial establishments, Assured Standard emphasizes that business owners should also protect their employees. Check out our complete guide on worker's compensation insurance.

    Frequently Asked Questions

    How do I choose business insurance?

    If you're an entrepreneur, it's important to protect your business and yourself—in a way that fits the size of your company. You'll want to start out by considering what kind of accidents or natural disasters could happen at work or nearby where employees might be hurt.

    From there, find reputable agents through word-of-mouth referrals by other entrepreneurs who are knowledgeable about particular lines of commercial insurance available. Shop around for policies and reassess your needs every year.

    Is business insurance a legal requirement?

    Employers' liability coverage is a mandatory requirement for most businesses that have employees. However, other types of insurance can also be required by regulatory bodies, such as professional indemnity and property damage insurance.

    When should I buy business insurance?

    It's a good idea to get business insurance when you're starting your small business. With the right coverage, it can help protect your company from various risks, such as workers' compensation and property damage.

    What is a legal hazard example?

    The American legal system can be a financial risk for insurers because it motivates people to bring litigation suits in order to realize the potentially lucrative profits.

    Many lawsuits filed against insurance companies involve negligence, including claims of breach of contract or coverage disputes that arise from being denied payment after an injury occurred. This makes anything associated with liability possible grounds for filing a suit and thus considered a potential legal hazard.

    Do you need an LLC for business insurance?

    As a business owner, it is important that you are aware of the legalities surrounding your employees. Some states require employers to carry workers' compensation insurance. If required by law in your state, an LLC should be no exception and will need coverage for lost wages and medical bills if they want to avoid fines or jail time down the road.

    Most states do not require business liability or hazard insurance coverage. However, business owners shouldn't be too quick to dismiss these policies. If you have the funds, we recommend looking into business insurance coverages for added protection. Otherwise, a natural disaster could wipe your establishment off the map—literally and figuratively.

    Try not to skimp on your property insurance policy. Low, affordable premiums are great, but prioritize getting sufficient coverage for your commercial establishment instead. Trust us, understating your property's value will hurt you in the long run. Remember: damage exceeding your business owners' policy coverage will come out of pocket.

    Assured Standard explains that entrepreneurs can use insurance to protect their businesses from a wide range of natural and man-made risks. Check out our resources on the best insurance policies for your business.

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    Assured Standard will protect your business with the right insurance, depending on your needs. Now more than ever, it’s crucial to have the right general liability insurance experts on your side. Protecting the future of your business starts today.
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