Business · SBA loans · Hazard is not flood
“Hazard insurance” on an SBA loan is the lender’s name for property coverage on the collateral. It is not flood insurance, not mortgage insurance, and not general liability. The commitment letter sets the limit. This page will not invent an SBA dollar minimum.
The building limit should track rebuild cost, not the sale price and not the loan balance. Land is not insured. A lender minimum protects the loan. It can be less than a full rebuild. If the form only pays replacement cost when the building is insured to a stated percent of rebuild cost, a limit set at the loan balance can short the claim. That percent is a condition of the form. It is not a statute, and it is not on every commercial form. Business personal property is a separate limit. It belongs on the policy when that property secures the loan. A general-liability policy pays other people’s injury and property damage. It does not rebuild your building. A businessowners policy often packages property and liability. It does not add vehicles or workers’ compensation by implication.
The same idea on a smaller firm: a Dallas small business and a Texas contractor. Colorado: Colorado business insurance. Proof for the lender: a certificate of insurance. The water the hazard form leaves out: Texas flood and Colorado flood.
Sources and further reading
- U.S. Small Business Administration
- TDI — Why flood is separate from a homeowners policy. A commercial property form is its own contract.
- Freedom — A certificate is not an endorsement
