Hazard Insurance for an SBA Loan: Do You Need It?

If you use a property as collateral for an SBA loan, you need hazard insurance that covers the property.
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Written by Rosalie Murphy
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You need hazard insurance on any property that you use as collateral for an SBA loan. If you don’t have hazard insurance — or if you fail to maintain the property in accordance with the SBA’s requirements — you may not be able to get an SBA loan, now or in the future.

Hazard insurance is a type of business insurance that can help you repair a building your business owns after it’s damaged. Most businesses should have this coverage, especially if they own or rent property or have valuable inventory or equipment.

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What is hazard insurance for an SBA loan?

Business hazard insurance is a policy that pays out when buildings are damaged in accidents or natural disasters. The SBA requires hazard insurance on buildings used as collateral for SBA loans

Code of Federal Regulations. § 120.160 Loan conditions. Accessed Aug 3, 2023.
; this is to ensure that damaged property can be repaired and that it will maintain its value.

Most insurance companies don’t sell a policy called “business hazard insurance.” Instead, look for commercial property insurance. This type of policy covers the buildings your business owns or rents, as well as the contents inside. It can also help make up for the income your business loses while making repairs.

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When is hazard insurance required for an SBA loan?

You need business hazard insurance on property that serves as collateral for an SBA loan. Specific requirements, however, vary by loan type:

SBA 7(a) loans

The SBA requires hazard insurance for all assets pledged as collateral on SBA 7(a) loans greater than $500,000. For loans of $500,000 or less, hazard insurance is required for all real estate acquired, refinanced or improved with the proceeds of an SBA loan.

For loans of $500,000 or less with non-real estate collateral, on the other hand, lenders must based requirements on their policies for similarly-sized non-SBA commercial loans

U.S. Small Business Administration. SBA Information Notice.

SBA 504 loans

Hazard insurance is always required on what is being financed by the SBA 504 loan.

Additionally, for 504 projects greater than $500,000, the SBA requires hazard insurance on all assets pledged as collateral. Like 7(a) loans, for 504 projects of $500,000 or less, hazard insurance is required for all real estate acquired, refinanced or improved with the proceeds of an SBA loan.

SBA disaster loans

SBA Economic Injury Disaster Loans worth more than $25,000, which have to be secured by collateral, require hazard insurance.

SBA flood insurance requirements

If your collateralized property is in a flood hazard area, you’ll also need a flood insurance policy that covers the property’s full value

Code of Federal Regulations. § 120.170 Flood insurance. Accessed Aug 3, 2023.

SBA microloans require flood insurance, but not hazard insurance.

Where to get hazard insurance for an SBA loan

You can get hazard insurance for an SBA loan from most business insurance companies. Insurers typically sell commercial property insurance, and you may be able to get a quote and buy business insurance online in a matter of minutes.

A commercial property insurance policy with a $60,000 limit and $1,000 deductible comes with a median premium of $67 per month, according to online business insurance marketplace Insureon

Insureon. Commercial Property Insurance. Accessed Aug 3, 2023.

Getting multiple quotes can help you find the best business insurance coverage at the best price. Here are a few of NerdWallet’s picks for where to get hazard insurance for an SBA loan.

Next Insurance

Best for: Getting commercial property insurance right away.

Next Insurance sells business insurance policies online to businesses of all sizes, in a transaction that only takes a few minutes. Next’s commercial property insurance policy includes business interruption insurance, which can help make up for your business’s lost income after a disaster.

Chubb Small-Business Insurance

Best for: Entrepreneurs who need a business owner’s policy.

Commercial property insurance is often sold as part of a business owner’s policy, which also includes general liability insurance. Chubb’s BOP is one of the best on the market because it includes business interruption insurance, extra expense coverage and coverage for accounts receivable records. If your business earns less than $1 million in annual revenue, you can buy a policy online with the help of an automated coverage assistant.


Best for: Businesses that also need flood insurance.

If you’re in a region where you need flood insurance, you can work with an independent insurance agent to buy a National Flood Insurance Program policy from Nationwide. You can also get business property insurance coverage and other commercial insurance coverage you need from this insurer. Use Nationwide’s website to find a local agent who sells their policies.

State Farm

Best for: Working with an insurance agent.

If you prefer in-person support when you shop for insurance, a State Farm agent who sells business insurance near you can help you get business property insurance and most other types of coverage you might need.