Home Based Businesses Need More Coverage Than You Might Think
Home-based businesses may seem safe from many risks associated with other small businesses, but in fact, many risks are present in and around your home. Some potential areas of concern include:
- A delivery person or customer comes to your home for business purposes and slips and falls on the stoop
- Your inventory is lost due to fire, storm or theft
- You give a client faulty advice and the client loses money and sues you for negligence
You might think that these occurrences are covered under your homeowners insurance policy, but in all likelihood they are not. Most homeowners insurance policies provide minimal coverage for business equipment in your home, but most will exclude coverage for businesses operating within the home. You will have little to no coverage for lost data, lost income, or liability claims relating to your in-home business.
If you operate a business from your home, do business inside and outside your home, or visit clients in their homes, you may need additional coverage. You can get additional coverage for your in-home business in several ways. The type of insurance you need depends upon the type of business you have, whether or not you keep inventory, have employees, or conduct on-site meetings or receive deliveries.
- Endorsement to your homeowners insurance policy. You can add an endorsement, or rider, to your homeowners insurance policy that provides more coverage for your home-based business. This type of policy is most appropriate for a one-person business without a lot of valuable equipment or many business-related visitors, and one who is unlikely to suffer a major loss if unable to operate for a while as a result of a disaster. The endorsement will typically add about $2,500 in business equipment coverage as well as some additional liability protection at a very affordable price.
- In-home business policy. Some insurance companies offer a specialty policy for in-home businesses. The in-home business policy has some features of policies designed for larger businesses, but with much lower policy limits. A typical in-home business policy will provide $10,000 of business property coverage and a liability coverage limit of your choice, usually between $300,000 and $1 million. It will also provide limited coverage for loss of valuable documents, accounts receivable, offsite business property and use of equipment. These policies are considered to be affordable for most in-home business owners, and provide more broad protection than an endorsement on your homeowners policy.
- Business owners policy (BOP). A business owners policy is designed for small businesses. It bundles several types of coverage into one policy, allowing the business to secure broad coverage at an affordable price. It is recommended for home-based entrepreneurs who need more than $10,000 of business property coverage as well as coverage for damage to equipment and other assets, liability coverage for customer injuries, loss of critical records coverage, and business interruption coverage, which protects you if you are temporarily unable to operate due to a covered loss (fire, storm, etc.).
As your business grows, you may also have a need for other types of insurance coverage, including commercial auto insurance if you use a vehicle primarily for business purposes, and workers’ compensation insurance if you have employees.
Have you started or are you thinking of starting a home-based business? Are you concerned about whether or not you have enough insurance coverage? We can help you assess the risks you face and determine if you need any additional coverage. Contact us today to learn more.
