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Tag: commercial property insurance

What Is Hazard Insurance?

Posted on August 19th, 2023 by Cassandra Love8 mins read

What is hazard insurance text overlaying image of orange caution tapeKeeping your business’s doors open depends on a number of factors. But it’s clear that maintaining your business’s property and equipment is a huge part of that. If these assets are damaged in a fire or natural disaster, it might be difficult for your business to recover. So, you need to protect them. The best way to protect your business and be able to recover some of the costs associated with repairing or replacing your property, is to carry enough hazard insurance. Otherwise known as commercial property insurance.

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What Does Hazard Insurance Cover?

Hazard insurance covers both the building that your business owns or rents, as well as the equipment that it uses. Depending on your policy, hazard insurance will generally cover the cost to repair or replace the following items:

 

  • Personal property
  • Tools and equipment
  • Inventory
  • Furniture
  • Computers
  • Accounts receivable
  • Documents
  • Outdoor landscaping

 

It will cover damages to the above due to:

 

  • Fire and smoke damage
  • Theft and vandalism
  • Some weather-related events such as hail, lightning, snow, sleet, or ice
  • Explosions
  • Aircraft or vehicles
  • Sprinkler leakage
  • Building collapse
  • Water (in certain specific cases)
  • Civil unrest or rioting

 

Damages caused by floods, earthquakes, acts of terrorism, nuclear attacks, or damage resulting from war are typically not covered by hazard insurance policies. You will need a separate insurance policy to protect your business from these occurrences.

Does My Business Need Hazard Insurance?

Even though business owners in many states are not required to have hazard insurance. It is still a good idea to get it because it can assist in covering the costs of damages that you would otherwise have to pay for out of your own pocket. 

 

And while you might not be required by your state to have hazard insurance, in many cases if you want to borrow money for your business from a financial institution, you will most likely be required to have a particular type of hazard insurance policy. For instance, loans from the Small Business Administration (SBA) may require evidence of business hazard coverage.

 

If you’re looking to take out a loan for your business, you can read more about this topic here.

Do I Need Hazard Insurance if I Have a Home Business?

If you run your business out of your home, your homeowner’s insurance policy might not be sufficient to cover the business-related property that you keep in your home. This means you’ll probably want to have a separate policy. 

The Cost

The price of hazard insurance will vary widely depending on a number of factors, including:

 

  • The age of your building/property – If the workspace that you own or rent is older, you’ll typically pay higher premiums because repairs to older properties tend to be more expensive.
  • The value of your building/property – The higher the total value of your assets, the higher the premium for this coverage will be.
  • Whether you choose a cash value or replacement cost policy – With a policy that pays out based on the actual cash value of your property, your payout will be determined by how much your property was originally purchased for before it was damaged. But if you have a policy that pays out based on replacement value, you will be covered for how much it would cost to buy a brand new version of the item that was damaged. Because of the effects of depreciation, cash value insurance is typically more affordable than replacement value insurance.
  • Coverage limits – As is the case with the vast majority of insurance policies, your monthly premiums will go up as you add more coverage.
  • Lender requirements – A lender may require that you have a certain amount of property insurance coverage before they will approve your application for a loan. The more insurance your lender requires, the larger your premium will be.

Hazard Insurance for a SBA Loan

The Small Business Administration (SBA) helps small businesses get the credit they need by putting the government’s name on loans made by commercial lenders. The lender provides the loan, and if the borrower doesn’t pay back the loan, the SBA will cover up to 85% of the loss. 

 

To get a small business loan from the SBA, you need to show that you have hazard insurance. Having this type of policy shows that you own real assets that can be taken if you can’t pay back the loan. For example, if a construction company wants to borrow money to buy a piece of equipment but can’t pay back the loan, the lender can take ownership of the equipment.

Types of Hazard Insurance SBA Might Require

In order to be eligible for a loan from the SBA, you will have to show that your business has adequate insurance coverage. This could mean having general liability coverage as well as commercial property insurance/hazard insurance. Keep in mind that depending on the kind of loan you want to get, the Small Business Administration might require you to have other types of insurance coverage, such as workers’ compensation.

 

Specifically, the Small Business Administration requires the following when it comes to hazard insurance:

 

  • The minimum required coverage amount is 80% of loan principal.
  • Your business’s name must appear on the insurance policy.
  • Your DBA name must be included in the policy if you use one.
  • You must show proof of the required insurance within 12 months of receiving your loan. If your business does not already have it when you apply for your loan.

Is Hazard Insurance Tax Deductible?

The Internal Revenue Service considers business insurance premiums to be an ordinary and necessary business expense. So, yes it can be tax deductible. But there are other factors to think about when determining if your hazard insurance is tax deductible.

 

If you have a home-based business, you may be able to deduct some of your operating costs from your taxable income. Insurance premiums can fall into this category, along with utilities and home office essentials. For instance, you can deduct half of your annual hazard insurance premiums if your home is used for business purposes in excess of 50% of the time.

 

If your company suffers losses in an area where a federal disaster declaration has been issued, you may be eligible for deductions. If you have hazard insurance and your insurer only pays a portion of your claim, for instance. You can deduct the amount of your claim up to $500 per incident.

 

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Other Types of Business Insurance You Need

What, where, and how you do business will determine the specific types of coverage your company needs. The following are some examples of common types of business insurance policies, other than commercial property/hazard insurance:

 

Workers’ Compensation

Workers’ compensation, which is also referred to as “workers’ comp,” is a type of insurance policy that is mandated by law. It provides benefits to employees in the event that they sustain an injury while performing their job. Employees can receive financial compensation, medical benefits, or both from the fund. Which fills the role of an insurance policy for disabled workers. Different states have different regulations regarding workers’ compensation, so check out our state-by-state guides.

General Liability Insurance

Standard liability claims made by third parties (people who are not affiliated with your company) are covered by general liability insurance. This type of commercial insurance policy will pay for your company’s legal defense expenses in the event that your company is sued for causing bodily injury, damage to property, or injury to reputation. This includes everything from hiring an attorney to paying for court-ordered judgements and settlements. As well as any other costs that may arise.

Business Owner’s Policy

General liability and commercial property insurance are the two main components that make up a business owner’s policy, or BOP. Which is essentially a bundle of the two (or more) types of commercial insurance. With a BOP, you will be protected from financial loss and covered for any claims that would be covered by either of those two types of policies. One simple policy can protect your small business from a variety of significant legal risks. 

Commercial Property Insurance

As covered above, this type of policy typically includes coverages for the most common hazards. It safeguards both the structure and the contents of your business’s property.

Commercial Auto Insurance

If your business uses vehicles, you’ll need commercial auto insurance to cover things like liability, accidents, medical bills, personal injury protection, and uninsured motorists. It’s similar to a personal auto insurance policy. But commercial auto insurance has different eligibility requirements, coverage, exclusions, and limits than personal auto insurance.

Working With EZ

Our insurance agents work with the leading insurance companies across the country to ensure that you have access to the best coverage options for your business and its employees. In fact, we can save you hundreds of dollars annually by tailoring our search to find you exactly what you need, at the best price possible. If you have any questions, please do not hesitate to contact us at 877-670-3538.

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Additional Insured VS Loss Payee

Posted on November 22nd, 2020 by Cassandra Love5 mins read

Insurance terminology can be confusing, you’re a business owner, not an insurance expert. It can be difficult to differentiate between terms, but it is crucial to understand the differences in order to ensure that you are getting the right coverage, and that you are in compliance with your plan’s conditions. For example, there are two terms, “additional insured” and “loss payee,” that both describe a third party who requires special protection as part of your commercial insurance policy. The two terms may be similar in some ways, but are very different in terms of the protection offered to all parties involved.

Additional Insured

caucasian hand holding a pen and paper pointing to another set of hands
You should request to be added to a business’ liability policy if you are being contracted to perform a job. It will protect you in case something goes wrong.

Simply put, an additional insured is anyone added to an insurance policy who is not the primary policy holder. If your business contracts any outside workers or businesses that could be held liable for jobs that they perform while working with you, those third parties will often request to be added to your commercial liability policy. Adding them to your policy will mean that they will be covered for work done with your business or on your premises. You should also request to be added to a business’ liability policy if you are the one being contracted to perform a job. 

For example, let’s say you hire a janitorial company to clean your workplace, and a customer or other person who doesn’t work for your business gets hurt on your premises because of something the janitorial company has done. If you have listed the janitorial company as an additional insured on your general liability insurance policy or business owners policy, BOP, then the janitorial company will be protected under your policy in case they are sued for negligence. The additional insured has liability protection, but they don’t have a legal first right to claim payments from the named insured’s insurance policy. 

Loss Payee

A loss payee is a third party listed on a commercial property insurance policy’s declarations page who is entitled to all or a portion of the insurance claim payments in the event of a loss. When there is a loss payee, who is usually a finance company, bank, or other lender, listed on a policy, the insurance company will pay claims directly to the loss payee first before it makes payments to anyone else, including the policy owner. The named insured, or policy holder, comes second  because loss payees have an insurable interest in the property.paper that says loan agreement with a pen on it

For example, if your business takes out a loan to purchase a building, the mortgage company who is financing the building might require you to list them as a loss payee on your commercial insurance policy’s declarations page. So, if there is any damage to the property, such as a fire, or an accident, then the mortgage company’s interests will be protected. Whenever you file a damage claim, your insurance company will have to notify the loss payee (your mortgage company). The insurer will then issue a check to pay for repairs, made out to both the named insured (you) and the loss payee (the mortgage company).

The Difference

silver scale with a question mark on each side
Additional insured and loss payee are similar, but the difference determines what protection you get.

Additional insured and loss payees are both entitled to receive insurance benefits from the named insured’s (policy owner) policy. The main difference is that additional insured will receive liability protection, whereas loss payees will only receive property damage coverage. Additional insured generally cannot receive any payments for any property claims, unless they have a direct involvement in the claim. For example, if the janitorial service from above did not service an area of your business where a customer was injured, then they would have no ability to file a claim. 

Whenever you work with another business that increases your business’s legal liability, you should consider requesting to be added as an additional insured on their policy. On the other hand, if you have a direct interest in investing in another business and are considering becoming their lender, then you should request to be added as a loss payee on their insurance policy. That way your interests are protected, and you will get first rights to claim proceeds from their insurance company in case of any damage. 

You can’t add an additional insured or a loss payee to all types of small business insurance; these endorsements are only available on some small business insurance policies. To find out if you can add either to your insurance policy, and which one might be right for you, you should speak to an insurance agent. EZ.Insure offers highly-trained agents who will review your business insurance policies, make sure you are properly insured, and help you determine if a third-party request to be named as a loss payee or additional insured is reasonable. Make sure you’ve got the right coverage for your business at the right price by connecting with one of our agents. To get started, simply enter your zip code in the bar above, or to speak to an agent directly call 888-615-4893.

Coinsurance Clause? Agreed Value? Make Sure You Have Enough Commercial Property Insurance!

Posted on October 22nd, 2020 by Cassandra Love6 mins read

Having enough commercial property insurance coverage is crucial to protecting your business. Whether you’re choosing to insure the actual cash value (ACV) or the replacement value of your real property (your building) and business personal property (everything in it), you need to purchase a policy that will cover as much as possible in case disaster strikes. One major storm, one act of vandalism, or one kitchen fire can mean thousands of dollars in repairs, and could even mean closing your doors forever.

There is another reason, though, that you need to purchase the right amount of coverage: your insurance company might actually require you to have a certain amount. Check your policy for what is known as a coinsurance clause, and make sure that you’re meeting your insurance company’s requirements, otherwise you could end up paying for damages to your business out-of-pocket.

What Is Coinsurance?

caucasian hands pointing at a piece of paper that says "insurance policy" on it
Make sure to read your commercial insurance policy to see if you are required to pay a coinsurance clause.

Your commercial property insurance can feel like another expense in a very long list of expenses that pile up every month. It might be tempting to cut your premium by skimping on coverage – after all, what are the odds that you’ll be forced to make a claim? Well, commercial property insurance claims are more common than you might think, and more costly than you might think, as well. That means that, if you’re covered by a commercial property insurance policy, your insurance company will have to lay out a lot of cash in the event that you do make a claim. It also means that your insurance company needs you (and every other business with a policy) to pay enough in premiums to keep them afloat. 

One way that insurance companies make sure that you’re paying enough in premiums is by adding a coinsurance clause to your policy. You may be familiar with this term as it relates to health insurance, but it works a little bit differently in a commercial property insurance policy. If you have a coinsurance requirement in your health insurance plan, it means that your insurance company pays a certain percentage of the bill, and you pay the rest. If you have a coinsurance clause in your commercial property policy, it means that you need to purchase a policy with a certain policy limit, or maximum amount that your insurance company will pay for a claim. 

For example, your insurance company might write an 80% coinsurance clause into your policy. This would mean that you would need to purchase enough insurance to cover 80% of the value of your property. So, if you were insuring a building that would cost $1 million to replace, you would have to purchase at least $800,000 in coverage. 

How Coinsurance Works

Coinsurance clauses encourage business owners to purchase enough insurance to make sure that any possible claims are fully covered, and to make sure that insurance companies collect enough premium dollars to keep rates fair for everybody. Not every policy will have a coinsurance clause – check your policy conditions to see if yours has one. If you do have a coinsurance clause, it won’t have any effect on your policy unless you experience a loss that requires you to make a claim. If you make a claim, and you haven’t fulfilled your coinsurance requirements, then you could face a penalty.

If you need to make a claim for damages, your insurance company will compare the insurance limit on your policy to the amount of insurance you were required to purchase based on your coinsurance clause. If you purchased less than you were required to, your insurance company might reduce your claim payment in proportion to the difference. For example, if you purchased 10% less than required, your insurance company might pay 10% less than they would if you had purchased adequate coverage.

2 pie charts with the 80-20 rule. an arrow is pointing the 20% towards the other pie chart labeled 80%

For example, let’s say that you have an office that is valued at $100,000, and you have a 80% coinsurance clause in your property insurance. You would have to insure your office for at least $80,000. But let’s also say that you’ve only insured it for $40,000, 50% less than you were required to. There is a fire in your office that causes $20,000 in damages – but because you insured your property for 50% less than you were supposed to, your insurance company will now only pay 50% of the claim, or $10,000. You can see why it’s important to pay attention to your coinsurance requirements!

One other very important thing to note: your insurance company will decide whether you have met your coinsurance requirements based on what your property is worth at the time that the damage occurs. So, if your property has increased in value, and you haven’t purchased more coverage, then you could be hit with a penalty.

Avoiding a Coinsurance Clause

illustration of black hands shaking with a black and white suit on the arms
if you want to avoid the coinsurance clause, then you will have to buy agreed value coverage.

One way to avoid a coinsurance clause is to purchase agreed value coverage. An agreed value clause is added to a policy when you and your insurance company agree on the insurable value of your property. In order to reach this agreement, you need to submit a statement of values to your insurer before your policy begins. This statement of values will list everything you are insuring and its value.

Once you have provided a statement of values to your insurer, they will waive your coinsurance penalty for one year (the term of your policy). If you end up making a claim for damages, your property will be assessed based on the agreed-upon value as long as you have insured your property for that amount.

Getting the right commercial property insurance policy is one of the most important things you need to do for your business. Being underinsured can spell big trouble, because you could be hit with a coinsurance penalty by your insurance companies. Always make sure that your policy is keeping up with your growing business, and always make sure to go through your insurance conditions with a fine tooth comb. If you need help with either of those things, talk to EZ. Our knowledgeable agents can answer all of your commercial insurance-related questions, find you great policies, and keep them all up-to-date – and we’ll do it all for free! To get started with us, simply enter your zip code in the bar above, or you can speak to an agent by calling 888-615-4893.

How Is Your Commercial Property Insurance Premium Calculated?

Posted on July 24th, 2020 by Cassandra Love5 mins read

No two businesses are exactly alike. No two business insurance policies are alike either. If you’ve been comparing insurance plans, you know exactly how true that is. You might be wondering why your plan is so different from your competitors or why there are so many different options. There are 7 factors that go into setting the price of your premium. Here’s an inside look into how your insurance company decides exactly how much to charge you.

1. Coverage Form

woman in a business uit with a form in her hand and pen in the other.

 

Getting insurance for your business can seem like being in an endless sea of forms. Property insurance is no different. The first factor that goes into deciding your premium is the coverage form, which lists all the specific things that you need insured, like your building and its contents. Some commercial property insurance includes business interruption insurance,  which covers any loss of income you might experience while repairing damaged property. That means your coverage form could also include “lost income” on its list.

2. Cause of Loss Form

The next factor that insurance companies use is the cause of loss form. This form details the risks that you want your business to be insured against and can include various natural and man-made disasters – anything that can cause damage to your business. You decide how much coverage you want (and how much you’re willing to pay) by choosing between a basic, broad, or special causes loss form. 

Basic and broad policies are what is known as “named peril,” meaning they cover only what is specifically listed in the policy. The only difference between them is that broad forms cover a few more events than basic forms. A special cause of loss form, on the other hand, provides what is known as “all risks” coverage, meaning anything that isn’t specifically excluded from the policy is covered.  

3. Building Construction

Your insurance company will also want to know how likely your building is to be seriously damaged in case of a disaster. To figure this out, they will look at what materials went into the construction of your building. This will help them decide how likely it is to be destroyed by something like a fire or an earthquake. 

4. Occupancy

building next to each other, one painted red and one painted green.
Who you share your building with, or how close you are to other businesses will also affect your premium price.

Who you share your building with, or how close you are to other businesses will also affect your premium price. For example, if you run a stand-alone clothing or gift boutique, then your premium would be less than it would be  if your shop shared a wall with a restaurant with deep-fryers. 

5. Property Location

Where your business is located obviously also matters. Being near the ocean, or a river, can spell disaster in case of flooding – and that means higher premiums. Your insurance company will look at how likely you are to be affected by disasters like hurricanes or earthquakes. They will also take into consideration whether you are in an urban or rural area. Businesses in a rural area might have more trouble accessing emergency services like a local fire department, and businesses in an urban area might be more prone to things like vandalism.

6. Amount of Insurance Being Written

This one doesn’t require too much explanation: the more insurance coverage you want, the higher your premium will be. If you have a huge building with a lot of expensive inventory, or an office that is filled with high-tech equipment, and you want maximum coverage, you’re obviously going to pay a higher premium.

7. Applicable Coinsurance Requirement

caucasian hand pulling a credit card out of a black waller while sitting in front of a laptop.
Some insurance companies have what is known as a coinsurance requirement written into their policies.

Finally, some insurance companies have what is known as a coinsurance requirement written into their policies. Most insurers that have one of these requirements will ask that you maintain coverage for at least 80% of the value of your property. If you fail to do this, you will be penalized and will not receive a full payout in the case of claim. If your company has a coinsurance requirement, then you know that you’ll have to pay a high enough premium to cover at least 80% of your property.

Insurance companies have ways to protect their bottom lines, and you should, too. It’s important to protect your business with commercial insurance – and it’s important to make sure you have the right coverage. That’s where EZ.Insure can help. We’ll answer all your questions, find you the best policies at the best prices, and even sign you up when you’re ready – all for free. When it comes to insuring your business, knowledge is power! To get started with us, simply enter your zip code in the bar above, or you can speak to an agent by calling 888-615-4893.

Thinking of Canceling Your Commercial Insurance? Read This First

Posted on July 19th, 2020 by Cassandra Love5 mins read

Crisis can hit any small business at any time. Unforeseen circumstances, such as the recent pandemic, can force businesses to temporarily close their doors, leaving their owners wondering how to stay afloat. In cases like this, it is only natural to want to find ways to save money. One of the first things you might consider doing to save some pennies is to cancel your insurance policies. But before you do that, you need to know how that will end up costing you more in the long run. Here are 5 reasons why you should think twice before canceling your commercial insurance.

1. You Probably Won’t Get a Full Refund on Your Premium

caucasian hand pulling out the inside of his jean pocket.
There is no penalty for canceling, but you will not get a full refund on your paid premiums.

Let’s say you’ve only had your commercial insurance for a few months out of the year when a crisis hits and you need to temporarily close your business. You might think that canceling your insurance will mean getting a refund on the remainder of the premium that you’ve paid for the year. But that is generally not the case: there is usually a penalty for early cancellation of your policy.

It should come as no surprise that insurance companies have ways of protecting themselves against customers buying insurance, using it once, and then dropping it. One way they do this is with a minimum earned premium, which is the minimum amount an insurance company is willing to take for writing a policy. For example, if you have a policy with a $500 yearly premium and you cancel 6 months into the policy, you would get $250 back if there were no minimum earned premium. However, if there is a minimum earned premium of $300 on your policy, the most you could be refunded is $200. Some policies do not have minimum earned premiums, while some have 100% minimum earned premiums, so check your coverage. And don’t forget that most of the taxes and fees you’ve paid on your policy are never refundable. 

2. You’ll Pay More to Restart Coverage

If you’re viewing your closure as temporary, remember that, when you reopen, you’ll need to purchase insurance again. This might not seem like a big deal; after all, you’ve already gone through the process once. But there is a problem with canceling and repurchasing commercial insurance: insurance companies view businesses that have had a gap in coverage as more of a risk to insure. This translates to an automatically higher premium for you when you decide to buy insurance again.

red sign with "sorry we're closed" in white
If you lose your permit or license, then you will have to shut down your business.

3. You Might Lose Your Permits or Licenses

Does your business require special licenses or permits? At the very least, you probably needed to obtain a business license when you opened your business. Getting those permits and/or licenses was probably time-consuming at best, and a downright pain at worst – and remember that you probably needed proof of general liability or workers’ comp insurance to get those permits or licenses. If you cancel your business’ insurance policies, you risk losing the permits and licenses you worked so hard to get, and you might need to go through the process all over again. In some cases, you might even struggle to get them back: for example, if you own a restaurant with a liquor license, you might end up losing it to another business, since there are only a limited number of them given out in each city. 

4. Your Property Will Be at Risk

An empty business, such as a storefront, will always be at risk of theft and vandalism, even if you’ve boarded it up and protected it as best you can. Your commercial property insurance is what protects you from having to pay for damaged or stolen property; without it, you’ll be left with all the bills. the word risk spelled out on scrabble dice

5. You Could Find Yourself in Default

If you’re like most small business owners, you rely on one or more types of financing: a mortgage on a property, or a lease on equipment. Before you cancel your insurance policies, be sure to check the fine print of your mortgage or lease – you might find that not having insurance will mean defaulting on your loans, even if you’re up-to-date on your payments. You could lose your workspace, or have your valuable equipment repossessed, simply because you don’t have the required insurance policies.

Falling on hard times or facing a crisis is never easy. But add to the mix the business you’ve worked so hard for, and you may end up having to make some difficult choices. One thing to remember, though, is that your commercial insurance policies are there to protect your business, and any money you may save by dropping them can end up being canceled out in  the long run. If you need help, or have any questions regarding any type of commercial insurance, EZ.Insure is here with the answers. Speak with your own personal agent, any time, for free. To get started with us, simply enter your zip code in the bar above, or you can speak to an agent by calling 888-615-4893.

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