# Does an SBA loan require hazard insurance?

**Short answer:** Yes, on all assets pledged as collateral for 7(a) loans and 504 projects over $50,000. If coverage is not available, the loan cannot be approved. Source: SOP 50 10 8.1, Sec. A, Ch. 5, Para. C.1.

Canonical page: https://www.sbaexpress.loans/answers/does-an-sba-loan-require-hazard-insurance/
Last checked: 2026-11-08

Yes, for 7(a) loans and 504 projects over $50,000. SOP 50 10 8.1, Sec. A, Ch. 5, Para. C.1, requires hazard insurance on all assets pledged as collateral. If hazard insurance is not available, the loan cannot be approved. A separate policy is needed if your state requires added coverage such as wind, hail or earthquake.

The regulation at 13 CFR § 120.160(c) still says $500,000. SOPs are Loan Program Requirements under 13 CFR § 120.10, so expect lenders to apply the $50,000 line.

## Two exceptions for loans of $500,000 or less

- Residential real estate pledged in a lien position other than first, if hazard insurance cannot be obtained on it.
- A business whose assets have a full replacement value of $50,000 or less.

## SBA Express and Export Express

A lender that does not require hazard insurance must document the reason in its loan file. The SOP's example is an undue burden given a small loan (Para. C.1.d).

## What the policy must do

- Cover full replacement cost. If that is not available, cover maximum insurable value.
- Name the lender in a mortgagee clause for real estate or a lender's loss payable clause for personal property. On a 504 loan the clause favors the Certified Development Company (CDC) and SBA.
- Give the lender at least 10 days' prior written notice of cancellation.

A flood zone adds a separate requirement. Flood insurance follows Sec. A, Ch. 5, Para. C.3, and 13 CFR § 120.170.

## Sources

- [SOP 50 10 8.1, Sec. A, Ch. 5, Para. C.1 (Para. C begins p. 97)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [13 CFR § 120.160(c)](https://www.ecfr.gov/current/title-13/section-120.160)
- [13 CFR § 120.10](https://www.ecfr.gov/current/title-13/section-120.10)
- [13 CFR § 120.170](https://www.ecfr.gov/current/title-13/section-120.170)