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Why an Advisor Should Work with an Insurance Broker

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Wealth advisors who seek the support of an insurance broker not only set themselves up for success but most importantly, they also do so for their clients looking to purchase real estate.

An insurance broker provides a wealth of knowledge to help understand what potential liabilities ensue from the real estate purchase, as well as mitigate risk. 

This partnership will help you as an advisor, guide your client to make the best financial decision as well as plan for the future with the guidance of an insurance broker. Let’s dive into why an advisor should work with an insurance broker.

Infographic of Why an Advisor Should Work with an Insurance Broker

Types of Insurance Needed

The right insurance to cover your client’s upcoming real estate purchase depends on a variety of factors.

  • What kind of real estate is your client purchasing?
  • Where is the real estate located?
  • What is the size of the real estate?
  • What is the purpose of the purchase (personal or for business)?
  • Is the real estate located in a climate that requires additional coverage (i.e. fire zone, earthquake zone, etc.). 
  • And more

All of these answers will help advisors understand potential additional costs that may go towards insurance coverage (or even potential damage should an unforeseen issue arise). 

The different types of insurance policies your client may need for their real estate purchase include: 

  • Homeowner’s insurance 
  • Fire insurance 
  • Flood insurance 
  • Earthquake insurance 
  • The list goes on

The Benefits of Working With an Insurance Broker 

An insurance broker can assess the real estate property to see what potential risks the property has. If the piece of real estate is located in a fire zone, the insurance broker can identify what coverage would look like.

Essentially, working with an insurance broker helps list out all of the different insurance possibilities your client needs. Basic homeowners insurance or umbrella insurance may come with exclusions for coverage for fires, floods, etc.

Knowing what additional policies may arise allows you to sit with your client and discuss their financial strategy to help them maintain their goals.

Once you have the full picture from the insurance broker you’ve partnered with, you can then budget appropriately. You then have all of the materials necessary to make sure you can give a holistic overview to your client and tell them, “this is a financially smart decision” or, “let’s find a different route for you.” 

The main benefits of working with an insurance broker can be boiled down to these three factors:

  1. You help your client mitigate risk
  2. You save your client money both short term and in the long run 
  3. Your client will have better knowledge of the real estate investment they are making 
  4. As a broker, you will then understand where you can save your clients money and where they may have to invest more

Read on for more information on risk mitigation.

The Coverage Pitfalls of Insurtech

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With the rise of technology comes the rise of a new sector disrupting the insurance industry: Enter insurtech.

But what is insurtech, and what are its coverage pitfalls? Here, we have Brenda Jo Robyn, founder of Competitive Edge Insurance, on video to discuss the coverage pitfalls of insurtech.

What is Insurtech?

First, what is insurtech? Insurtech is a combination of the words “insurance” and “technology,” and refers to “technological innovations that are created and implemented to improve the efficiency of the insurance industry,” according to TIBCO.

Research shows that the insurtech industry is expected to reach a market size of $114 billion by 2030. This doesn’t come as a surprise considering that this tech helps large insurance companies explore new insurance options without the need for human efforts. Using information gathered from observed behavior, TIBCO says this could include:

  • “Dynamically-priced insurance policies
  • Small business insurance, and
  • Social insurance options

Insurtech also provides insurance companies access to data streams from IoT devices.”

An internet of things (IoT) device is a physical object “with sensors, processing ability, software, and other technologies that connect and exchange data with other devices and systems over the Internet or other communications networks.” 

Read on for more information on IoT devices.

The Pitfalls of Insurtech

Insurtech’s technological innovations can scour the internet, pulling information from a host of websites to make an informed insurance assessment.

While technology can sometimes work smarter than traditional insurance methods of insuring a business, insurtech also has its pitfalls.

Insurtech and Underinsurance

When it comes to evaluating and preparing property insurance, insurtech might be able to provide you with information including:

  • When the building was constructed
  • Permitting information
  • When there were last upgrades or renovations completed

Insurtech, however, cannot give you the details of what is inside a specific building. It will not be able to tell you information regarding:

  • The tenancy inside a building
  • Rooms of high value inside of a building that might require additional coverage (i.e. computer rooms)

So, because of this lack of information, you have a lot of very underinsured individuals when it comes to using insurtech.

Insurtech and Human Touch

As it’s been made clear, you do not receive the same human touch when you opt for insurtech.

At Competitive Edge Insurance, we believe it is helpful to have a professional as your advocate to take a look and give you options—not a technological innovation!

The most important thing that you receive with that human connection, according to Brenda Jo, is that this professional can share that an individual has options.

They can:

  • Cover their property at certain limitations, or
  • Decide to self-insure

A traditional insurance professional can help determine what self-insurance might look like. For example, what will they be insuring? Is the self-insuring simply increasing the deductible or not having that type of coverage altogether?

Our team at Competitive Edge can help take a look at your unique circumstances to help determine your areas of risk, where you’re covered, where you’re underinsured, and how to amend these pitfalls.

Interested in learning more? Read on in our article “How Does a Building Owner Know if They Are Underinsured?”

Will Homeowners Insurance Cover a Construction Project?

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So, you want to do a renovation or some construction on your home. Well, you’re not the only one! According to various studies, home remodeling has been hotter than ever during the COVID-19 pandemic. In fact, Houzz, an online home remodeling platform, reported a 58% annual increase in project leads for home professionals in June of 2020.

We don’t blame any of you homeowners for wanting to spruce things up, especially considering all the extra time many individuals and families have been spending at home the past two years.

When tackling a construction project on your property, however, it’s important to consider the bandwidth of your homeowners insurance. Is it enough? Or, should you consider investing in builders risk insurance as well?

Homeowners Insurance vs. Builders Risk Insurance

First things first, what’s the difference?

Homeowners Insurance

Homeowners insurance is defined as “a form of property insurance that covers losses and damages to an individual’s residence, along with furnishings and other assets in the home.”

It’s important to note that every homeowners insurance policy has a liability limit. This liability limit “determines the amount of coverage the insured has should an unfortunate incident occur.”

Homeowners insurance is typically used to repair or replace your home and its contents in the event of damage.

Builders Risk Insurance

Builders risk insurance, on the other hand, is not quite the same. Builders risk insurance is also known as “course of construction insurance.”

Hence its name, this type of insurance, is a type of property insurance that protects your home, or other buildings that are under construction. This coverage is essential to protecting projects from property damage that occurs due to:

  • Fire
  • Lightning
  • Hail
  • Explosions
  • Theft
  • Vandalism
  • Acts of God, for example, hurricanes

Builders risk insurance is a crucial part of a homeowner’s risk management strategy.

Will Homeowners Insurance Cover a Construction Project?

Is your homeowners insurance enough?

Whether you’re considering a from-the-ground-up construction project, kitchen or bathroom remodeling, or even room addition, there’s nothing more important than making sure you have the proper coverage.

Although each policy offers valuable coverage, they exist for separate types of risks. It’s important to note that while each policy will, of course, differ from carrier to carrier, homeowners should not rely on a homeowners policy alone to sustain the financial burden should a loss regarding their construction project occur.

After all, if homeowners insurance and builders risk insurance both covered the same risks, there would be no need for each to exist.

As a general rule, homeowners insurance covers damage to a property already in tact; builders risk covers damage to a property that is under construction.

Obtain the Coverage You Need

By consulting with an insurance broker prior to beginning a construction project on your home, you can learn all about gaps in homeowners insurance and where you may need additional coverage depending on your unique policy.

If you’re considering a project of your own, read on to learn more about how the California labor shortage is affecting the construction industry, and if there are qualified workers available to you at all.

Payment and Performance Bonds Explained

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Payment and performance bonds

Payment and performance bonds… The two are an odd pairing—unique in their own way yet dependent on each other.

Although payment and performance bonds have their differences, both are essential in protecting yourself in the world of insurance. Let’s explore the differences below.

Payment Bonds

What is a payment bond? Simply put, a payment bond guarantees payment for subcontractors and payment for materials once a project is completed.

Payment bonds are most commonly seen in construction. Payment bonds are a type of surety bond and are required for most state projects based on the Miller Act.

Surety Bonds

What is a surety bond? 

A surety bond is a contract where one party (the surety company) guarantees the performance of certain obligations in a contract of the second party (the principal or the insured) to a third party (the obligee).

When Do You Need a Surety Bond?

Surety bonds are needed for most licenses in the state of California and other states as well. Some examples of who might need a surety bond include:

  • Contractors
  • Real estate companies and agents
  • Financial institutions
  • Janitorial staff

Why Do You Need a Surety Bond?

Licensed bonds are required in many states to do business and are put in place by the state to protect consumers.

The insured, or principal, purchases these bonds in an amount prescribed by the state to pay the obligee (the state), in case there’s a claim against somebody’s license.

The Miller Act

As previously mentioned, surety bonds are required for most state projects based on the Miller Act.

The Miller Act was passed by the U.S. General Services Administration Public Buildings Service (GSA) to explain how payment bonds protect subcontractors and suppliers.

The GSA responds to any reports of nonpayment, following the legal action needed and protected by the Miller Act.

The GSA states that “the Miller Act requires that prime contractors for the construction, alteration, or repair of Federal buildings furnish a payment bond for contracts in excess of $100,000.” 

There are legal consequences for breaking a contract through the Miller Act.

The GSA expands: “Failure by a contractor to pay suppliers and subcontractors gives such suppliers and subcontractors the right to sue the contractor in the U.S. District Court in the name of the United States.”

Performance Bonds

The main difference between payment and performance bonds is that a performance bond ensures that the employer is satisfied with the job.

While both payment and performance bonds are surety bonds, performance bonds are visible in industries outside of construction.

A performance bond, according to Investopedia, “ensures the completion of a project.” A performance bond covers the ability of the contractor to perform and finish the job as per contract requirements.

If the contractor doesn’t perform, the contract bond kicks in and helps to pay for the completion of that performance.

A performance bond involves three parties:

  • The principal: The primary contact in the performance bond; responsible for performing the contract
  • The obligee: The person receiving the obligation
  • The surety: Responsible for making sure each party complies with the performance bond obligations

A Final Note

If these bonds are used and there’s a claim on a bond, the contractor who purchased the bond has to pay that back.

This considered, surety companies look for strong financials in a company, including assets, lines of credit, and letters of credit.For more information, watch this video about surety bonds and contract bonds. There, Brenda Jo Robyn, founder of Competitive Edge, lays it all out on the table in a way that’s easy to understand.

How Small Businesses Fall Victim to Cyber Attacks

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Cyber attacks are on the rise—and no business, big or small, is immune to the devastating financial loss that a cyber attack can have. So, let’s discuss a few aspects of cyber attacks to look out for, including:

  • What is phishing?
  • Why is it a problem?
  • Why are small businesses targeted?
  • How can your business prevent becoming the victim of a cyber attack?

Let’s dive in.

What is Phishing?

Phishing is an ever-growing concern defined as the “technique for attempting to acquire sensitive data, such as bank account numbers, through a fraudulent solicitation in email or on a website, in which the perpetrator masquerades as a legitimate business or reputable person.”

According to Brenda Jo Robyn, founder of Competitive Edge Insurance, phishing is “any activity that compromises your organization’s security.”

For more on phishing, read our article: “Why Is Phishing the #1 Thing Killing Small Businesses?”

Why is Phishing a Problem?

Let us provide an example of the dangers of phishing.

On February 5, 2021, according to The Pew Charitable Trusts, “a plant operator for the city of about 15,000 on Florida’s west coast saw his cursor being moved around on his computer screen.”

The cursor continued to move, “opening various software functions that control the water being treated [and boosting] the level of sodium hydroxide—or lye—in the water supply to 100 times higher than normal.”

If you didn’t know, the consequences of this breach could have been deadly if not caught immediately, as lye poisoning can result in:

  • Burns
  • Vomiting
  • Severe pain
  • Bleeding

While most cases might not involve the extremes of lye poisoning, this example shows the severity of phishing today. As a result, governments, states, businesses (big or small), and individuals should act accordingly to strengthen their cybersecurity efforts.

Why Do Data Thieves Focus on Small Businesses?

The consequences of a cyber attack on a small business are particularly severe. 60% of small businesses that have been hit by a cyberattack end up shutting down within six months of the attack.

Despite the irreversible aftermath of falling victim to a cyber attack and the fact that 43% of online attacks are now aimed at small businesses, CNBC reports that only 14% are prepared to defend themselves.

Interested in some more statistics?

Cyber attacks are not only extremely expensive to recover from but they also damage your business’s reputation and productivity, and can even be dangerous in the event of personal data being stolen.

This is why it is crucial to protect your small business from cyberattacks. But how can you protect yourself? What can the Florida plant case study teach us?

How Can You Prevent Phishing?

Luckily, there are measures you can take to prevent phishing as a business owner. Let’s discuss some options.

Training

  • Training your employees: To be vigilant; educate them on common phishing traps, email scamming tactics, and how to send data securely (In the Florida case study mentioned earlier, the employee who noticed the breach reported it immediately).
  • Training IT: To know what to look for

Be sure to document your training and review it on a weekly or quarterly basis with employees and staff.

Due Diligence

Ensure your business is conducting thorough, routine cybersecurity due diligence.

According to Security Scorecard, cybersecurity due diligence is “the process of identifying and addressing cyber risks across your network ecosystem.” Doing so provides “insights into potential gaps in network security so that they can be addressed before they are exploited by cybercriminals.”

For those who are interested in seeing where their business is in terms of safety, read on to learn how you can measure your company’s cybersecurity risk.

Have a Planned Crisis Response in Place

When it comes to cyber risk, there’s nothing worse than being ill-prepared. Of course, we couldn’t write about cyberattacks without mention of investing in a cyber liability insurance policy for your business.

A cyber liability policy might include:

  • Data Breach Coverage
  • Business Interpretation Loss Reimbursement
  • Cyber Extortion Defense
  • Forensic Support
  • Legal Support
  • Coverage beyond a General Liability Policy

As a small business, you must be prepared—because the consequences can be insurmountable. Interested in learning more about cyber insurance and why you need it? Read on in our article “Why Does My Business Need Cyber Insurance?”

What Mandating the Vaccine Might Mean for Your Business Insurance

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Business owners have experienced unforeseen challenges as a result of the last nearly two years in a global pandemic.

The conversation surrounding the ethics of requiring vaccines has been floating around the workplace for about just as long.

In September 2021, however, President Joe Biden directed the Occupational Safety and Health Administration (OSHA) to introduce an emergency temporary standard (ETS) that requires companies with 100 or more employees to ensure all employees are:

  • Fully vaccinated
  • Or, that they submit to weekly testing and mandatory masking

*As of November 17th, however, OSHA has paused all vaccine mandates “after a federal appeals court upheld a stay.”

Regardless, it is still top of mind for employees. Here’s what mandating the vaccine might mean for your business insurance along with how you can prepare if the mandate is passed.

Who Would This Mandate Affect?

According to The New York Times, companies with 100 or more employees would “have until Jan. 4 to ensure all their workers are either fully vaccinated or submit to weekly testing and mandatory masking.”

This measure would be enforced to promote workplace health and safety and will affect “some 84 million private-sector workers across the country, including some 31 million who are believed to be unvaccinated.”

If the mandate comes into play, OSHA anticipates the ETS will be in effect for six months depending on COVID-19 statistics.

When Did This Mandate Come About?

“The measure was announced by President Biden in September [2021], and details were released on Nov. 4 by the Labor Department’s Occupational Safety and Health Administration [OSHA],” according to The Times.

COVID, ELP, and EPLI

First things first, what is Employer’s Liability Insurance? This form of insurance “protects your business when an employee sues over a work injury or illness,” according to Insureon. It is especially important, considering “almost one in five small businesses will face employee litigation” at some point.

Equally as important to consider is Employment Practices Liability Insurance (EPLI), which is insurance that “provides coverage to employers against claims made by employees.”

With the potential vaccine mandate, we can anticipate an increase in EPLI claims. As a result, we might see EPLI premiums increase. Kyle Jeziorski, Executive Vice President at Founder Shield offered insight: “I think insurers will try to add COVID-19 exclusions to EPLI policies and potentially offer the coverage for an additional premium.”

It’s definitely something we here at Competitive Edge Insurance will continue to keep a pulse on.

How Responsible Are Businesses for the Spread of COVID?

During the onset of COVID, many employees wondered to what extent businesses and business owners should be held liable if an employee were to contract COVID-19 on the job and suffer sickness or even death as a result.

The answer today is still clear as mud.

There are, however, steps your business can (and should) take to prepare for these newly introduced COVID-19 vaccine mandates.

Steps Your Business Can Take to Prepare

Business Insurance tells us that now is the time that businesses should prepare U.S. Equal Employment Opportunity Commission processes as well as human resources (HR) departments for what lies ahead.

As we well know, there are many employees across the U.S. who will request exemptions from receiving the COVID-19 vaccine due to religious or health reasons. This process, called an ‘interactive process,’ can take weeks or even months.

For businesses, this can be a lot added on their plates—especially if they receive a high number of requested exemptions.

Businesses should know this ahead of time and prepare accordingly.

Erect a Framework in Advance

“Businesses owe it to themselves to put together a framework to manage this,” says Chuck Kable, Chief Legal Officer and Chief Human Resources Officer at Axiom Medical. “You have to have a protocol and a process that you have to administer consistently and over time, and you have to treat everybody equally.” 

If businesses fail to do so, this is when liabilities begin to pop up. 

“Any mishandling of an exemption request can run afoul of anti-discrimination laws,” says Adam Kempe of Kelley Kronenberg. Companies might face various liabilities including:

  • Failure to maintain and keep private workers’ health information
  • Failure to follow steps in Equal Employment Opportunity Commission (EEOC) exemption requests

Consider OSHA Fines

If the headache of one of your employees filing a claim with OSHA as a result of your negligence isn’t enough motivation to get your ducks in a line, consider the hefty OSHA fines you might face.

If a complaint is filed, the first thing OSHA is going to look for is your current OSHA Covid Protection Procedures that are in place, which includes your Injury and Illness Prevention Program (IIPP). All employers are required to have IIPPs in place.

OSHA fines can be especially detrimental to your company’s financials because while OSHA personnel might come in looking for one thing, chances are they will do some digging, which could lead to additional fines or penalties. OSHA, in that sense, is similar to the IRS—except for employers.

Employee Screenings

A final precaution that employers should take, according to Brenda Jo Robyn, founder of Competitive Edge Insurance, is to conduct thorough employee screenings.

Brenda Jo also acknowledges that it may be the case that many people will choose to not work as a result of this mandate.

“You can find out a lot about an employee or potential employee from a screening,” says Brenda Jo. “Be sure to look at their workers’ compensation claims and do reference checks.”

Take advantage of not only their most recent reference but reach out to prior references as well.

A Final Word

With this potential vaccine mandate firing up, it’s especially important for employers to be on their A-game as far as safety procedures and insurance are concerned.

“There’s nothing that prevents a company, especially one not familiar with these issues, from now bringing in appropriate HR personnel, a consultant, or employment counsel to understand what to expect,” says Kempe of Kelley Kronenberg.

On the topic of vaccines, did you know that Brenda Jo Robyn, founder of Competitive Edge, began her career as an Epidemiologist who specialized in immunizations? To hear more about vaccines, specifically, her passion for Polio research, visit this blog post.

What’s the Difference Between a Surety Bond and a Contract Bond?

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The world of insurance can be complex—and for contractors, work can be dangerous, too. As a contractor, the question of what insurance you need to stay protected is likely to come up.

So, for starters: What’s the difference between a surety bond and a contract bond? Which do you need to stay safe?

Today, Brenda Jo Robyn, founder of Competitive Edge Insurance, is here on camera to give us the spiel; including the differences, benefits and risks, and what you need. Let’s dive in.

What is a Surety Bond?

There are three parties involved in a surety bond, including:

  • The surety company
  • The principal or the insured
  • The obligee

A surety bond is a contract where one party (the surety company) guarantees the performance of certain obligations in a contract of the second party (the principal or the insured) to a third party (the obligee).

When Do You Need a Surety Bond?

Surety bonds are needed for most licenses in the state of California and other states as well. Some examples of who might need a surety bond include:

  • Contractors
  • Real estate companies and agents
  • Financial institutions
  • Janitorial personnel

Why Do You Need a Surety Bond?

Licensed bonds are required in many states to do business, and are put in place by the state to protect the consumer.

The insured, or principal, purchases this bond in an amount prescribed by the state to pay the obligee (the state at this point), in case there’s a claim against someone’s license.

What is a Contract Bond?

A contractor performance bond is a written contract that guarantees the performance obligations under a contract.

Contractor performance bonds are used frequently in the construction industry but are also sometimes used in manufacturing and supply chains as well.

When Do You Need a Contract Bond?

The short answer: It depends! Contractors can be required to have a contract bond for different parts of the process when they’re bidding for a job, according to Brenda Jo.

What Is a Bid Bond? When Do You Need One?

Oftentimes, a bid bond is required to submit a bid for a project. Typically, these bids are in the public arena for states or cities. For example, the Department of Forestry.

“A bid bond lets this entity know that the contractor can provide a payment and performance bond should the job be awarded to them,” says Brenda Jo.

“If the contractor is awarded the project and the contractor decides that they cannot fulfill the obligation, the bid bond helps to pay for the difference in price that it costs to get a new contractor in.”

This leads to the next kind of bond couplings, which is the payment bond and the performance bond. Let’s discuss.

Payment Bonds and Performance Bonds

What is a payment bond? What about a performance bond?

A payment bond is a bond that guarantees payment for subcontractors and payment for materials.

A performance bond, on the other hand, covers the ability of the contractor to perform and finish the job as per contract requirements. If the contractor doesn’t perform, the contract bond kicks in and helps to pay for the completion of that performance.

infographic showing the difference between a surety bond and a contract bond

A Final Word

An important note: For all bonds mentioned, if they’re used and there’s a claim on a bond, the contractor who purchased the bond has to pay that back, says Brenda Jo.

This considered, surety companies look for strong financials in a company, including:

  • Assets
  • Lines of credit
  • Letters of credit

Surety companies look for anything that creates a picture that says you’re worthy of having a bond put into place—because if the bond is utilized and pays out, they need to know that the purchaser of the bond can pay that money back.

Bring in The Experts

At Competitive Edge Insurance, we work with insurance carriers across the country to place all types of business coverage. We are always seeking out new insurance companies to write hard-to-place and high-risk business insurance.

Don’t let cancellation dissuade you from finding comprehensive coverage. We can help! Learn more by connecting with our team today.

Additionally, for those interested in learning more, choose between our articles on the key differences between general contractors and construction managers and the difference between payment and performance bonds.

What to Expect from Changing Contractor Costs

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The global pandemic brought many changes to the construction and builders industry. Here’s what to expect in 2021.

Read more

EIDLs and Hazard Insurance: Your Full Guide

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When running a business, there are so many things to keep track of—especially considering the COVID-19 hullabaloo we’ve experienced over the past nearly two years. Various types of insurance, Small Business Administration (SBA) loan requirements… the list goes on.

An important topic that continues to change, however, is Economic Injury Disaster Loans (EIDL) and the subsequent need for hazard insurance if it is collateralized. This brings up many questions, like 

  • How much does it cost? 
  • Why do I need it? 
  • How can I obtain coverage? 

Each of these questions and more is answered in this article: Economic Injury Disaster Loans (EIDL) Hazard Insurance: Your Full Guide.

Let’s dive in.

What are Economic Injury Disaster Loans (EIDLs)?

EIDLs are “the primary form of Federal assistance for the repair and rebuilding of non-farm, private sector disaster losses” administered by the SBA. “The disaster loan program is the only form of SBA assistance not limited to small businesses.”

An Update on EIDL

Over the summer, many small business owners received an alarming email from the EIDL program through the SBA.

As part of the EIDL requirements, you must have hazard insurance in order to apply for the EIDL loan. In the email from the SBA sent earlier this year, individuals were informed that those who had received the EIDL loan, must present proof of insurance in order to have their loans forgiven.

Here’s a look at what the email said.

The Email Stated:

“The SBA is launching a new round of EIDL Advances – called Targeted EIDL Advance – which provides eligible businesses with $10,000 in total grant assistance. If you received the EIDL Advance last year in an amount less than $10,000, you may be eligible to receive the difference up to the full $10,000. The combined amount of the Targeted EIDL Advance and any previously received Advance will not exceed $10,000.” 

Along with Information Claiming That:

“Businesses eligible for the Targeted EIDL Advance must meet ALL the following eligibility criteria:

  • Located in a low-income community, as defined in section 45D(e) of the Internal Revenue Code. The SBA will map your business address to determine if you are in a low-income community when you submit your Targeted EIDL Advance application.
  • Suffered economic loss greater than 30 percent, as demonstrated by an 8-week period beginning on March 2, 2020, or later, compared to the previous year. You will be required to provide the total amount of monthly gross receipts from January 2019 to the current month-to-date.
  • Must have 300 or fewer employees. Business entities normally eligible for the EIDL program are eligible, including sole proprietors, independent contractors, and private, nonprofit organizations. However, agricultural enterprises, such as farmers and ranchers, are not eligible to receive the Targeted EIDL Advance.”

The SBA said loans won’t be forgiven unless you have proof of insurance coverage. If you’re looking to check which COVID-19 loans are forgivable, visit this list.

EIDLs and Hazard Insurance

But Why Do You Need Hazard Insurance to Qualify?

“The Small Business Administration is a lender. Just like any other lender, the SBA is trying to protect their loan’s collateral from unforeseen circumstances,” says Naomi Bishop on hazard insurance. Therefore, all borrowers must obtain hazard insurance within 12 months of loan approval. Additionally, coverage must be maintained throughout the life of the loan.

Additionally, when applying for a loan, you guarantee a loan by offering assets as collateral. For example, financial (i.e. cash and cash equivalents), physical (real estate), vehicles, and so on.

If you then default on an SBA loan, the lender has the right to seize and sell assets as repayment. Even others’ collateral may be at risk if they signed a guarantee on the loan. For this reason, insurance is crucial to keeping your business and others safe.

More on Hazard Insurance

Under the requirements for the EIDL, the SBA requires that your business has hazard insurance to cover 80% of the loan amount. Hazard insurance is a term for coverage that may be included within several different types of property coverage. 

If you have any kind of business property insurance, you are likely covered. In fact, commercial property insurance is considered hazard insurance. This coverage protects your company’s physical assets, like buildings, furniture and equipment, supplies, computers, inventory, customer’s goods, signs, fencing, and even lost income from damage or loss. 

The SBA does not allow personal hazard insurance to be considered for loans. Business auto insurance is also not allowable coverage for this requirement.

What is Happening Now?

Effective September 8, 2021, many updates were made to the COVID EIDL program. All of which can be read in full here on the SBA website.

The impact of the primary policy changes include:

  • Higher loan amounts are available
  • Increase[d] use of funds flexibility
  • SBA automatically defers for 24 months from loan origination
  • Simplifies affiliation rules for all industries…
  • Created additional way[s] to meet program size standards… to include industries uniquely impacted by COVID-19 [that] continue to experience significant economic hardship
  • Introduces maximum cap on corporate groups

Do You Have the Right Coverage and Correct Amounts to Satisfy Your SBA Loan?

As previously mentioned, the SBA requires that at least 80% of your loan amount is covered with hazard insurance. It may be beneficial to have 100% of your business property value covered with hazard insurance. If you received EIDL funds without coverage, you should contact your insurance agent as soon as possible.

There are a few other rules related to the insurance coverage that the SBA has stated:

  • The insurance must be in the name of the business and must show proof of business property.
  • If someone is a sole proprietor, and they have a DBA (Doing Business As), the DBA must be on the policy.

How Much Does Hazard Insurance Cost?

The premiums that one pays for hazard insurance is dependant on several factors, including:

  • Selected limits and deductibles
  • Type of coverage
  • Where you live (some states are more prone to natural disasters than others)

Although this is not an end-all-be-all formula, for homeowners, the annual cost of hazard insurance typically costs between 0.25% to 0.33% multiplied by the purchase price of your home.

Hazard insurance doesn’t have to cost an arm and a leg. By comparing rates with the help of Competitive Edge Insurance, you’re sure to get the best deal for your business while making sure you stay compliant with the SBA’s requirements.

Curious about the difference between hazard insurance and high-risk insurance? Competitive Edge specializes in high-risk insurance— learn “What Classifies High Risk.”

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WANT TO KNOW HOW MUCH YOU COULD BE SAVING ON YOUR INSURANCE COSTS?

WANT TO KNOW HOW MUCH YOU COULD BE SAVING ON YOUR INSURANCE COSTS?

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Competitive Edge Insurance

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P: 619-259-5459
F: 619-377-0144

830 Orange Ave Suite L Coronado, CA 92118

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