Small businesses receiving Economic Injury Disaster Loans will require the coverage.
The Small Business Administration (SBA) is requesting that applicants for Economic Injury Disaster Loans (EIDLs) provide proof of hazard insurance, which is a type of business owners policy insurance.
Business owners are advised to inform themselves about how much insurance they need for an SBA loan.
The SBA is requesting hazard insurance from applicants applying for EIDLs. Therefore, small businesses will find it worth their while to learn about this type of coverage, how to get it, and how to know if they already have it. As of the writing of this article, the SBA says that it requires applicants to show proof of insurance for loans over $25,000.
The good news is that this coverage is readily available and may already be included in the insurance you have through your business owners’ policy. If you don’t already have it, purchasing this coverage is quick and easy to do, providing you with everything you need to secure your loan.
To start, it’s good to know what hazard insurance is and what it provides your business. It is a policy to cover your business in the case of physical damage to the building and its contents when that damage was caused by covered perils, also known as “hazards”. As such, it is actually a coverage you may already have within your business policies.
Review your policy to see if you already have hazard insurance coverage.
Your property policy – whether it is a commercial property, homeowners’, condo, or renters’ policy – covers you against a list of hazards. Typically covered are many types of storm damage (such as wind, hail, tornadoes and so on), theft, fire, sudden or accidental discharge (of water), overflow (of water from plumbing) and with some special endorsements – sewer backup, service line coverage, and/or equipment breakdown. While some states find personal policies to be acceptable if, for instance, a business is operating out of a home, others do not, and a commercial policy must be purchased.
The key is to understand the limitations and exclusions…
on most personal policies which excludes losses that are considered business or commercial use. Therefore the SBA is not accepting homeowner’s or renters policies as acceptable proof.
The cost of a Business Owner’s Policy which is sometimes referred to as a BOP, usually is not that expensive. Of course, this does depend on the type of business and a few other factors. For example, an estimated cost for an accountant BOP in the Los Angeles area could run from $400 annually on up – not too bad! The easiest way to get an estimate for your type of business is to start with getting a quote online.
Once you have your hazard insurance in place, you’ll have taken an important step ahead in securing your SBA EIDL loan.