Disasters have the potential to be devastating for businesses of any size. Unfortunately, small businesses are even more vulnerable to disasters and the physical and financial devastation they cause. Most small businesses operate on tight budgets, meaning that recovering from a disaster may prove too costly and time-consuming for your business. Because the recovery process is so costly and time-consuming, business hazard insurance is something no business can afford to be without – though small businesses have a special need for this protection. This vital insurance helps to cover the costs of repairing and replacing the physical structure of your business. Keep reading to discover key details about hazard insurance for small businesses and why it is so important for your small business.
What is Business Hazard Insurance?
Business hazard insurance protects businesses against financial losses resulting from hazardous conditions. These conditions include a wide variety of instances, including some weather-related events, fires, vandalism, etc. In some policies, business hazard insurance is included with your business property insurance or commercial property insurance coverage. It is certainly something you’ll want to be certain is offered in your business insurance protection.
In addition to protecting the physical property of your business, business hazard insurance also provides key protection for the equipment required to operate your business. While most people are focused on the enormous expenses of buildings, which are sizeable expenses, other important resources protected by business hazard insurance include the following:
- Furniture
- Office equipment
- Computers
- Goods and inventory on hand
- Tools and equipment
- Personal property
- Valuable documents
- Accounts receivables
Before choosing your business hazard insurance, also take a little time to investigate the differences between replacement cost coverage and actual cash value coverage. They can make a massive difference in your ability to recover after a disaster.
Replacement value coverage pays a sufficient amount to purchase a new version of the lost property while actual cash value (ACV) coverage will reimburse you for the depreciated value of items that were lost. On the plus side for struggling small businesses, ACV coverage is typically less expensive than replacement cost. However, it will limit your ability to recover if disaster should strike.
What Does Business Hazard Insurance Cover?
You should note that many hazards are protected when you invest in business hazard insurance. However, you need to be aware of specific exclusions, such as floods and earthquakes, that may require additional insurance protection. Most small business insurance policies provide protection against damage, losses, or replacement costs for the following events:
- Theft
- Fire
- Wind
- Power outages
- Weather-related natural disasters (snow, storms, lightning, etc. – be aware of exclusions like floods, earthquakes, etc.)
- Explosions
- Vandalism
- Building collapse
- Power surges
You should note that business hazard insurance doesn’t cover every potential hazard. Most policies have specific exclusions. Moreover, if an event, such as a sinkhole, isn’t listed on your policy, it isn’t covered by your insurance.
If you have concerns about specific risks or events, consider purchasing additional protection for your business. Events you can purchase specific protection against include:
- Flood
- Equipment breakdown caused by user error
- Terrorist attacks
- Earthquakes
- Sewer or water backups
The better you understand the hazards your business faces, the more prepared you can become by purchasing appropriate and adequate insurance protection against these risks. Working with a reputable independent insurance agency, like Arnold Insurance, can help you purchase your hazard insurance and other small business insurance protection, with confidence that you’re making a wise choice for your risk mitigation efforts.
Does My Small Business Need Hazard Insurance?
If you have a mortgage for your business property, you are likely required by your lender to have hazard insurance. The Small Business Administration, for instance, requires small businesses to maintain hazard insurance to protect their mortgage lenders from business losses.
However, the benefits this type of coverage offers go well beyond covering your mortgage commitment. It’s a good idea to consider hazard insurance for your business as a means to protect business assets and property from these risks. Replacing the assets and property without this important insurance protection will be costly – even on a small scale. A catastrophic loss could force your business into bankruptcy without the buffer hazard insurance offers.
So, the short answer is a resounding, “Yes!” You need hazard insurance for your small business. Unless, of course, you’re independently wealthy and can easily absorb the costs of repairing, replacing, and rebuilding after disaster strikes. For the average small business owner, budgets are tight and profit margins are small.
Hazard insurance protects your building or property, regardless of whether you own it or rent it, against losses and damage caused by hazardous conditions. You can also secure funding with the right amount of hazard insurance for your business.
Small business owners understand that doing business is risky. However, there are some risks you can mitigate by securing the right insurance coverage options to manage these risks more effectively. When you have the right type and amount of insurance coverage, you can turn your attention to operating and growing your business with greater peace of mind. Effective risk management and mitigation strategy are essential for protecting your business, helping it grow, and providing the tools your business needs to thrive regardless of the hazards ahead.
Don’t wonder, “What is hazard insurance for business?” or “Does my small business need hazard insurance?” Contact Arnold Insurance to discuss this important coverage so you can make an informed decision as part of a well-rounded risk-mitigation strategy.