If you’re operating a home-based business, it’s likely that your homeowner’s policy doesn’t cover your business. You need insurance for your home-based business.
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 owners policy (BOP).
What is Home-Based Business Insurance?
Home-based businesses require some type of home business insurance. How much you need, and what type you need, depends on what type of business you run.
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).
Remember that you’ll have a menu of choices for selected coverage and coverage limits that you can choose. You can unite those choices under the umbrella of a business owner’s policy.
Types of Home-Based Business Insurance
Here are types of insurances that small business owners may need to provide coverage for both your home and home business:
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 also covers injury, in a sense. It covers third-party injuries that occur when a client holds you responsible for damages that occur as a result of your services or products. This is also called Errors and Omissions Insurance, and it’s something nearly any business needs. If claims of this nature are filed against your business, your legal fees may be astronomical without this type of insurance.
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 which is 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: As business liabilities go, this type of insurance is a relative newbie, but you need it if you have employees. Employment Practices Liability protects small business owners against claims such as 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 insurances 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 lots of variables across many types of companies. It depends on the types of businesses, the value of companies’ properties and equipment, the business locations, and the type of business conducted.
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?
Make a list of risks that could affect your home business. Then match those potential risks to a type of coverage that would negate them.
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 includes coverages for business operations, including equipment, professional liability, business use of a vehicle, data breaches/computer failures, and more.