According to NASA, Texas ranks 1st in the U.S. for variety and frequency of natural disasters. At least 1 major disaster event is declared every year in the Lone Star State. Business owners in Texas need enough hazard insurance to rebuild their businesses if required. Learn more about weather-related hazard insurance for businesses in Texas.
What is Business Hazard Insurance?
Business hazard insurance helps with the costs of repairing or rebuilding your business structures if they’re affected by a covered event. It covers many weather-related disasters, including fires, wind, lightning, blizzards and hail.
Best Hazard Insurance in Texas
Compare business insurance quotes to protect your Texas enterprise.
Texas Business Hazard Insurance Coverage
Texas business hazard insurance isn’t a standalone policy. Instead it’s part of a commercial property insurance policy. These policies have relatively broad coverage, including natural disasters and other events like theft.
Commercial property insurance policies don’t cover every weather-related disaster, though. They typically don’t cover weather-related flooding or earthquakes, so you need to purchase separate coverage for those events.
You can buy commercial property insurance on its own or as part of a business owners policy (BOP).
When Do You Need Hazard Insurance?
Like any insurance policy, the best time to buy hazard insurance is before you need it. Given how unpredictable the weather is in Texas and that you can’t predict theft and other events, it’s best to buy hazard insurance before your business opens. If you don’t already have it, It’s best to buy it as soon as possible.
How Hazard Insurance Works
Hazard insurance is part of a standalone commercial property insurance policy or the commercial property insurance coverage in a business owners policy.
If you experience a covered event, whether it’s weather-related or something else, you file a claim with your insurance company. To file a claim, you’ll need to complete a form that asks for information like your policy number, business information and information about the claim. You’ll also need to submit documentation supporting the claim like pictures of the damage and any receipts for work you’ve already completed.
The insurance company will typically assign a claim number and may provide a dedicated point of contact. For many claims, they’ll send out an adjuster. An adjuster reviews the claim and examines the damage to help the insurance company determine how much to pay you.
After that, you’ll receive a decision from the insurance company about whether the claim is approved or denied.
Hazard insurance claims are paid in 2 ways. One is based on the replacement cost of items damaged. This means the policy pays the amount it costs to replace the item without considering depreciation. Depreciation is when the value of an item becomes lower over time.
The other is based on actual cash value (ACV). This method does account for depreciation, which means you may receive less from the insurance company.
Review any policies you’re considering to see if they pay based on replacement cost or actual cash value.
Business Insurance Policies and Coverages to Consider
Texas business owners should consider several types of insurance. Here are the ones that are the most helpful in the event of a weather-related disaster.
Commercial Property Insurance
Commercial property insurance covers the structures of your business’ buildings, as well as the contents. Structures include permanently installed fixtures, machinery and equipment, outdoor fixtures and items you need to service the building. It also covers any additions you have under construction.
Building contents include your inventory, computers and raw materials. This insurance also covers the property of others that’s in your care.
Business Owners Policies (BOPs)
A business owners policy (BOP) bundles 3 types of coverage and is a good choice for small business owners. In addition to commercial property insurance, BOPs include:
- Commercial general liability insurance: This coverage helps to protect you if you’re sued by a third party for specific reasons. It helps with lawsuits related to bodily injury, property damage, and personal and advertising injury. Personal and advertising injury involves lawsuits involving false advertising claims, libel, slander, copyright infringement and similar issues. Some policies also include medical payments, which means a third party could file a claim with your insurance company and receive payment for medical bills without filing a lawsuit.
- Business interruption insurance: In the event of a disaster, your business may need to shut down or relocate while repairs are being made. Business interruption insurance can help with those costs. It assists with lost income (as based on your financial records), mortgage, rent or lease payments, taxes, payroll and loan payments. These policies typically have a 2 to 3 day waiting period and pay benefits for 30 days, but that period can be extended if you elect a longer period when you take out the policy.
Earthquake Insurance
Earthquake insurance can help your business recover from this devastating event. Earthquakes can happen anywhere, but they’re especially likely in areas near a fault line. This insurance covers damage to your business structures and inventory. It may also help with lost income.
Coverage starts when the damage costs more than your deductible, and deductibles for this coverage tend to be high, according to the Insurance Information Institute.
Flood Insurance
Floods, like earthquakes, can happen anywhere, but this coverage is particularly important if you live near water or in a hurricane-prone area. It covers damage to your building and its contents caused by flooding.
You can buy flood insurance policies from companies partnered with the National Flood Insurance Program or private flood insurance policies. Each option has its pros and cons, so evaluate your options carefully.
Pros and Cons of Hazard Insurance for Businesses
Here are the benefits and drawbacks of hazard insurance.
Pros
- It provides valuable protection from a variety of events, including weather.
- You can bundle it with other types of commercial insurance.
- You can lower the policy limits or increase the deductible for lower costs.
Cons
- It may not cover all the costs you face after a disaster.
- It doesn’t cover some events, like earthquakes and certain types of flooding.
Is Hazard Insurance Right for You?
Just like homes need homeowners insurance, businesses need hazard insurance. Texas, in particular, faces numerous weather-related perils. A commercial property insurance policy can cover those perils and more. Review your options and choose a policy that will help you rebuild your business.
Frequently Asked Questions
Is hazard insurance required in Texas?
Texas business owners are not required to have hazard insurance. That said, it’s wise to get it. It protects your business, and it’s sometimes required to receive certain types of disaster assistance. For example, the Small Business Administration may require businesses to have hazard insurance to qualify for an economic injury disaster loan (EIDL).
How much is hazard insurance?
Hazard insurance is in commercial insurance policies. The median cost of commercial property insurance is about $60 per month. The cost varies depending on the size of your business, the value of your business equipment and buildings, the type of work you do, the location of your business and other factors.
