Home-Based Businesses Need Insurance Too

Do you have a home-based business? You’re not alone, more than half of U.S. businesses are home-based. Whether you’re doing web design, teaching music, doing medical billing, running a daycare center, or any other kind of work from home, you need insurance that covers the additional risks you’re exposed to. Here’s what you need to know about home-based business insurance.

Is My Business Covered By My Homeowners Policy?

Yes and no. Most people think their homeowner’s insurance policy is all the coverage they need, but a typical homeowner’s policy may not provide enough coverage. The usual limit for your business equipment while at home is $2,500 and $250 when it’s off the premises.

Homeowner’s policies also tend to exclude business liabilities. Even if your home business is only you working part-time, there’s still the chance for situations where you’re at risk for liability. One such situation arises when somebody comes to your home for a business purpose such as an appointment, gets hurt while on your property, and thinks it’s your fault. Your homeowner’s policy probably wouldn’t provide coverage to pay for the damages.

How Do I Get The Business Coverage I Need?

There are three ways to get additional property and liability insurance for your home-based business, an endorsement to your homeowner’s policy, an in-home business insurance policy, or a business owner’s policy. The coverage you’ll need depends on the type of business you do, how much money it makes, and the amount of coverage you need. Here are explanations of the three ways to get the coverage you need:

• Homeowner’s Policy Endorsement – Some homeowner’s insurers offer an endorsement to homeowner’s policies that adds additional property coverage and some limited liability coverage. You might be able to double your standard policy limits for business equipment from $2,500 to $5,000 but this is usually limited to businesses with less than a certain amount of annual receipts, typically around $5,000.
• In-Home Business Insurance Policy – Some insurers offer in-home business insurance policies with features similar to larger commercial policies but lower policy limits and a lower premium. The premium for this coverage is generally less than $300 a year and covers your business property for $10,000. This type of policy includes general liability coverage with a limit between $300,000 and $1 million that you select. If you have to stop doing business because of damage to your house, the in-home policy will cover any loss of income and ongoing expenses, such as payroll, that the business incurs for up to one year. An in-home business policy also provides limited coverage for the loss of valuable documents, accounts receivable, offsite business property, and use of equipment.
• Business Owner’s Policy – A lot of insurance companies offer small business owner’s policies that combine a variety of coverages into a single policy. If you’re thinking about this type of policy, you should talk to your agent about whether the broader property and liability coverages that come with a business owner’s policy are necessary for your business.

Beyond these, there are additional types of business insurance you may need to consider depending on your situation. A couple of coverage types to think about are:

• Business Vehicle Insurance – Your auto insurance policy probably has coverage for some business use of your vehicle. It’s unlikely, however, to provide coverage if the insured vehicle is used primarily for business. It won’t provide coverage for any vehicle owned by a business either. If you’re driving your car for business and get into an accident that’s your fault, an injured person could sue you personally. If your auto insurance policy doesn’t have enough coverage to pay for all the damages a lawsuit may be filed against your business. If this is something you’re concerned about, you should discuss whether you need a business auto policy with your insurer.
• Workers’ Compensation Insurance – When it comes to workers’ compensation insurance, each state has its own rules for when an employer must provide coverage. If you have three or more employees, it’s a good idea to look into your state’s rules to see if you need to provide workers comp insurance.

Running a business out of your home can be fun and rewarding but it also exposes you to additional risks that could be costly if you don’t have the right insurance coverage. If you have a home-based business get in touch with us so that we can help you make sure you’ve got the coverage you need.