Hazard insurance covers the expenses of replacing or repairing personal property, tools, equipment, furnishings, and inventory in the event of structural damage to your house or company.
There are various forms of home and business insurance that may fulfill the SBA’s hazard insurance requirements. If you own your house and work from it, homeowner’s insurance should provide the necessary coverage. Renter’s insurance may be sufficient if you do not own the premises where you work. In any instance, whether you work from home or not, the insurance policy must include your business name in order for the SBA to accept it.
Hazard insurance includes commercial property insurance. Personal property insurance is not considered hazard insurance in certain jurisdictions, so check the requirements in your state.
When it comes to the SBA and its many loans, the majority of them do demand hazard insurance. However, one significant distinction between the EIDL and PPP schemes is that the EIDL requires hazard insurance, but the Paycheck Protection Program does not.
What Does It Include?
Hazard insurance, as well as any insurance policy that comes under this category, covers damage caused by natural catastrophes such as hail, fire, and water damage.
Assume there is a storm in your neighborhood, and the water destroys all of your computers. Your hazard insurance coverage would cover the expense of repairing or replacing them, allowing you to resume operations.
Is EIDL Loan Hazard Insurance Required?
EIDL loans necessitate the purchase of hazard insurance.
If you reside in a specific flood danger region in certain states, including California, you may additionally be required to obtain and maintain flood insurance for the entire insurable value of your business property for the duration of the loan.
Why Is It Necessary?
The standards for EIDL loan hazard insurance are in place to safeguard you and the SBA’s investment in your firm.
Essentially, it’s in the SBA’s best interest—and yours—to have your company insured in the event of an issue that prevents you from functioning. If you can get back up and running, you will be able to generate money and return your debt.
How Much Coverage Is Necessary?
So, how much hazard insurance is necessary for SBA EIDL loans?
The EIDL hazard insurance criteria now state that you must have coverage for at least 80% of the amount borrowed under the Economic Injury Disaster Loan program. You may, of course, insure up to 100% if you want.
What Is the Process of Hazard Insurance?
Hazard insurance functions similarly to other types of property insurance. Your monthly payment is determined by your assets and property, as well as the amount of coverage you choose.
If something bad happened, such as a fire that destroyed your whole business, you would make a claim with your insurance carrier. The claims adjuster would come to your home to inspect the damage and figure out how much the company would pay you for the loss. When you get the funds, you will be able to fix or replace whatever was destroyed or lost.