Many small business owners and successful entrepreneurs prefer to operate their businesses at the comfort of their own homes. However, just because you can run your business from your back bedroom wearing fuzzy slippers, it doesn’t mean it’s less of a real business. It needs to be insured just like any other business.
Why? Well, your homeowner’s insurance won’t cover a claim by a deliveryman if they happen to slip and fall on your icy front porch. And in case your inventory in the garage catches fire, you can as well forget about it. You are largely on you own unless you have a separate home business insurance that covers your homebased business specifically.
Perhaps a worse scenario is if you give the wrong advice in your business and it costs your client a lot of money, the resulting lawsuit could mean taking a lot of money out of your pocket to defend against it or settle it, unless you’d taken an errors and omission insurance to cover such instances. Other losses that might not be covered by your homeowners’ or renters’ insurance include:
- If your house is robbed and some business equipment like a monitor is stolen. Such items are typically not covered because they’re considered business property.
- If your house burns down, your insurance provider might refuse to compensate you completely on the premise that you failed to mention that you ran a business from your home.
The key thing to note here is that neither renters’ insurance nor homeowners’ insurance policies cover homebased businesses. As such, it’s always wise to work with an insurance agent to discuss the details on the different options for insuring your home business. The kind of insurance you need for your business depends on the industry you’re in and the kind of business you run.
The following are the common types of insurance for home-based businesses:
Business Property Insurance
If you have any kind of equipment you use in your home-based business, such as a computer, printer, fax machine, furniture, etc. business property insurance provides coverage against loss or damage to the equipment used in your business. As mentioned earlier, homeowners’ insurance doesn’t cover losses or damage to business equipment losses.
As you talk with your insurance agent, ensure that your business insurance policy covers the cost of replacing your business furniture and equipment. Many insurance policies don’t cover the full cost of replacement, and usually only offer the value of the used property.
Do an honest assessment of how much it would cost you to get your business back on its feet if all the equipment was lost in an event such as theft or fire. If you have installed expensive, specialized software for your business don’t forget to include it in the cost of replacing your computer.
Once you have a good figure on how much it would cost to replace everything, ask your insurance company what it would cost to add the amount of coverage into your existing policy. Keep in mind that the higher the deductible you can afford, the lower the insurance premiums will be.
While you discuss about home business insurance with your provider, ask them about liability insurance for your business. If your already have renters’ or homeowners’ insurance, you might already be carrying liability insurance for the people who visit your property for non-business purposes. However, these policies usually don’t extend coverage to injuries and accidents on people on your property for business purposes, such as a meeting or delivery.
Professional and Product Liability
Plus, some kinds of business will require a special kind of liability insurance. For instance, if you’re offering professional services, you should consider professional liability insurance. If you produce and/or sell products from your home, you should consider having product liability coverage, in case your product or service could cause injury to a customer. Likewise, if you’ve employed some workers, consider adding workers’ compensation insurance.
Just as with the homeowners’ and renters’ insurance, your current automobile insurance won’t cover you for accidents that occur on your personal car while you’re on business errands. As such, if you have a truck for your business, or if you use your personal car for various business purposes, have your insurance provider know and get the coverage you need.
Keep in mind that your insurance provider might not have business automobile insurance. In such a case, you might have to seek a new insurance company to provide the services you need. If your employees have their own vehicles that they use for business related purposes, you want to get special insurance.
If one of your employees gets into an accident while on the job for you or your business, you may be liable for the accident. To cover for such situations, you’ll want to get employee’s non-owned automobile liability insurance.
Insurance Packages for Both Your Home and Business
Since working from home is increasingly becoming popular and normal, many insurance companies have formulated insurance packages to serve this new hot trend. These insurance policies are designed to offer home and business insurance at one go; covering your business equipment, whether the same equipment is used at home or elsewhere. Furthermore, the policies cover the different kinds of liability insurance that a home business requires.
The key advantage of these bundled insurance policies is that they are comparatively less inexpensive compared to adding riders onto your existing renters’ or homeowners’ insurance. Nonetheless, ensure that you’ve carefully gone through the kinds of coverage offered in any bundle you’re considering. Sometimes, the bundles are specifically designed for home offices, and they might not provide ample coverage if you say store or manufacture products from your home business.
There are other specialized insurance coverages for home businesses that may be better suited to yours. For instance, commercial crime insurance will protect against losses from fraud, equipment theft, and other crimes. Riders and endorsements on homeowners’ or renters’ policies alongside specialty home and office policies can sometimes be the best choice.
So, why do you need to have insurance for your home business? Well, based on the many different potential business liabilities that can impact your business, you’re better off with at least a few policies in place. Plus, it’s one less thing to keep you up at night, in your home/office!