If you run a home-based business, it’s probable that your homeowner’s policy does not extend coverage to your business activities. Therefore, you require home-based business insurance.
No worries. You can get a stand-alone home business property insurance policy or possibly add an endorsement to your homeowner’s policy.
You can choose from many types of business insurance. You should know that the majority of homeowner’s policies would only cover you for up to $2,500 on a home-based business property claim.
Once you know what coverages you need, you can combine your needs for the home-based business under one policy called a business owner policy (BOP).
What is Home-Based Business Insurance?
Home-based businesses need a form of home based business insurance. The amount and type of coverage required depend on the specific nature of your business.
If the equipment you’re using for your home business includes only a computer and printer as business assets, you may not need business insurance. But remember that $2,500 max claim limit on your general homeowner’s policy – would that cover you? That may not provide enough coverage.
A home-based business insurance policy covers you for business equipment and more. Do you need it?
Do You Need Business Insurance for Home-Based Business?
For home-based businesses, there are a number of business insurance benefits:
- Coverage for equipment
- Coverage for visitors
- Coverage for vehicles
- Coverage to protect clients’ personal information provided that you’ve stored on your computer
- Coverage to protect you from claims against you regarding your services or products (called professional liability insurance).
Keep in mind that you will have a variety of options for your chosen coverage and coverage limits. You can consolidate these options under a business owner’s policy.
Types of Home-Based Business Insurance
Here are the types of insurance that small business owners might require to cover both their home and home-based business insurance:
Workers Compensation Insurance – You’ll need worker’s compensation insurance if you have employees. If you don’t have employees, you may want to get disability insurance for yourself. If you suffer a personal injury or illness, disability insurance may help you pay bills as you go without income.
General Liability Insurance: Just as it sounds, general liability coverage provides broad coverage. According to the insurance information institute, this is one of the most needed insurances – where the majority of claims are filed. For example, if you have customers that come to your business and someone gets injured, general liability insurance provides coverage during a client’s visit. There are standard policy limits.
Professional Liability Insurance: Professional liability insurance provides coverage for certain injuries, specifically third-party injuries that arise when a client claims you are liable for damages resulting from your services or products. Commonly referred to as Errors and Omissions Insurance, this coverage is essential for nearly every business. Without it, if such claims are made against your business, your legal expenses could become overwhelming.
Business Auto Policy: Your personal auto policy may not be enough to insure a vehicle used for business purposes. Whether or not you need to add this insurance depends on the percentage of business use for the vehicle. The percentage defines the primary use.
Commercial Property Insurance: This is also called Business Personal Property insurance. This is needed if you have a business property that you use away from the home base. For example, someone who operates a photography studio from home takes a job shooting “senior” pictures along a bridge – and drops a camera into the water.
Employment Practices Liability: While this type of insurance is relatively new in the realm of business liabilities, it is essential for those who employ staff. Employment Practices Liability offers protection for small business owners against claims including wrongful termination and sexual harassment.
Electronic Data Processing – This type of insurance has many names but every company that handles customers’ information needs it. Basically, it helps provide coverages in the event you have a data breach. Most general commercial policies provide this coverage, but it is typically limited. This type of insurance can also protect you if you’ve had virus attacks or computer failures, which kept your company from doing business and created a loss of income.
What is Covered by Home Business Insurance?
Face it: Paying for various insurance is one of the ongoing expenses small business owners must pay as they run a company. You may never use it, but you can’t afford not to have it.
What’s covered for home-based business owners? Let’s review:
- Business equipment, including office furniture
- Business property damage
- Vehicle (if primary use)
- Data compromise by the company
- Professional liability for products and services
What is Not Covered by a Home-Based Business Insurance Policy?
- Your personal medical expenses
- False advertising conducted by you about the company
- Information about your company’s business patents and/or business process secrets
- Personal vehicle, when used for business
How Much Does Home-Based Business Insurance Cost?
There are numerous factors that vary among different types of companies. These include the nature of the businesses, the value of their properties and equipment, their locations, and the specific activities they engage in.
Here are a couple of ballpark numbers. A business owner’s policy with a slew of coverages may cost as low as $30 a month with basic coverage. In other words, as a sole proprietor, your cost for home-based business insurance may be less than $500 a year.
How to Get Home-Based Insurance for Your Small Business
Start by checking with your regular homeowner’s policy, to see if you can add an endorsement providing the coverage you need.
If not, find an insurance agent who specializes in home business insurance. Let an experienced agent be responsible for doing the research. You may find that an experienced agent may find you a money-saving option to combine ALL your insurances under one umbrella.
How can I Protect my Home Business?
Create a list of risks that could impact your home business. Next, identify the appropriate type of coverage that would address each of those potential risks.
What is the Difference Between Home-based Business Insurance and Homeowners Insurance?
A homeowners insurance policy does just that – protects your home and its contents. It also may cover outside structures such as garages and sheds.
Home-based business insurance provides coverage for various aspects of business operations, such as equipment, professional liability, business vehicle usage, data breaches, computer failures, and additional risks.
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