Insuring Your Home-Based Business

What You Should Know About: Insuring Your Home-Based Business

Don’t assume your Homeowners policy has your home-based business covered

What you should know:

  • Business activity in your home may not be covered by your standard Homeowners insurance policy. But coverage is available to protect your business and your home.
  • To help you get the right coverage, it is important to choose an insurance agent or company with specific knowledge about home business insurance.
  • Home business insurance options include adding an endorsement to your homeowners policy, purchasing multiple individual Business insurance policies, or buying a Business Owners Package policy designed for smaller businesses.

Today, more people than ever are operating a full or part-time business from home. Although savvy and creative in their own specialties, these entrepreneurs may not know where to begin to make sure their business – as well as their home and possessions - are protected against theft, fire and liability. Some may believe their homeowners policies cover all their home business insurance needs. As a result, many home business owners are uninsured. Don’t let that be your story.

First, ask yourself a few questions about your business to get an idea of what kind of insurance you need.

  • What type of business is it, how much profit do you anticipate and what is the value of your business property?
  • Do you have expensive equipment, such as computers and commercial printers?
  • Do you stock inventory at your home?
  • Does your business have employees, and will customers or contractors visit your home business?
  • Do you use your vehicle for business purposes?
  • Do you store your customers’ sensitive financial information on your home business computer?

The main types of insurance to consider for your home business include:

Property and Liability Insurance

What it covers: the value of your business property from loss due to theft, fire or other insured perils, plus liability protection to cover costs if someone is injured while visiting your business or using your products or services (you may need product liability insurance as well as property liability insurance). While your homeowners insurance may offer some protection, those policy limits may not be enough, or may exclude business activity in your home. Three options are available for property and liability insurance for your home business: Adding an endorsement to your homeowners policy, buying multiple stand-alone home-based business insurance policies or buying a Business Owners Policy (BOP) that combines several types of coverage.

Business Vehicle Insurance

If you use your personal vehicle for business purposes, you will likely need to purchase a separate Business Auto Insurance policy to make certain that you are protected if you are in an accident while using your car for business. This is especially important if you are compensated for carrying passengers in your vehicle, such as with an app-based “ride-sharing” service. Your personal Auto policy typically excludes coverage if an accident occurs while you are driving your vehicle for business purposes.

Workers Compensation Insurance

Once you hire an employee, state law may require that you purchase Workers Compensation Insurance to cover the costs if an employee is injured on the job and needs medical treatment. Workers Compensation also supplements income until the employee recuperates and can return to work. Each state has its own set of laws regulating when Workers Compensation needs to be purchased. Check with your insurance agent or your state’s insurance department to find out how this applies to your business.

Umbrella Policies and Health Insurance

You also may want to consider additional types of coverage, such as an Umbrella policy and Health and/or Disability insurance if you have employees. An Umbrella policy offers you extra liability insurance for a loss when the limits of your underlying policy are reached. Health and/or Disability insurance will cover medical costs if you become ill or injured and unable to run your business. And if you have employees you may want to consider looking into small group insurance programs for your business.

As your home-based business thrives, stay in touch with the insurance professional who handles your insurance policy, especially if your operation becomes more extensive than when you first bought your policy. If you neglect to do so and you have a loss, you may find that your policy has limits far below the actual current value of your business, which could expose your personal assets – like your home – to costly losses.

*Some information provided by Insurance Information Institute