Sand Hill's Chief Investment Officer, Brenda Vingiello, CFA, made a guest appearance on CNBC's Closing Bell on April 27, 2023 to share her views onread more
The Importance of Hazard Insurance for a Business
If you’re a business owner, you might be wondering which insurance coverage is right for you. There are many types of insurance, and while you might be familiar with some, hazard insurance is a very important one to consider. Let’s explore what it covers so that you have a better understanding.
Unlike liability insurance, which covers costs incurred during legal lawsuits, hazard insurance protects your assets from unforeseen events. Like liability, hazard insurance can be a significant boon and keep a business from going under if an unexpected issue arises. These events can include fire, vandalism, theft, storm damage, gas leak explosions, faulty sprinklers, the collapse of a building, and types of water damage. Many small businesses, especially new ones, struggle to overcome such problems and often must close their doors and cut their losses, which can be quite concerning for investors. Having a policy makes your business a more enticing investment for potential backers and helps allay their fears that something might go wrong. Similarly, you might be required to have hazard insurance that covers a specific portion of your property if you have a business loan. Loans from both the Small Business Administration (SBA) and Economic Injury Disaster Loans (EIDL) have different requirements regarding coverage limits.
For many small business owners, the cost is an understandable factor when considering whether to invest in hazard insurance. It’s essential to read the fine print on every policy because your coverage is dependent upon the plan you select. Some plans will include coverage for earthquakes and floods, while others will cover man-made disasters only. Thankfully, these types of policies are incredibly flexible, meaning you can tailor them to the specific needs of your business and not pay extra for coverage you don’t require. For most small businesses, the average price is just over $60 per month, or about $750 per year, depending on the limit and deductible.1 Factors such as the brick-and-mortar size of your business, the value of your wares and equipment, and the insurance company you select will have an impact on the bottom line.
Due to this, it’s essential to get quotes from several insurance companies and compare the coverage offered versus the monthly payment. It’s also important to note that insurance companies use two different metrics when determining the value: the replacement cost and the actual cash worth. The latter is a representation of the item minus depreciation, as the true cash value is characteristic of the asset with a decline in value over time. This means that the replacement cost will likely be the higher of the two.
There are, of course, pros and cons to every insurance policy. The downsides come in the form of deductibles, paperwork, overall cost, and insurance company practices. For instance, businesses occasionally find themselves in a months-long back and forth trying to get a claim filed correctly for reimbursement.
We at Sand Hill want to make sure that our clients understand these pros and cons before making any final decisions when it comes to selecting a hazard insurance policy for your business. Please keep in mind that it’s essential to discuss each option with your Wealth Manager, as well as your estate and tax professionals before implementing, to be sure that you’re following the best pathway tailored to your financial journey.
Articles and Commentary
Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
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