Business Insurance for Home Based Businesses
These days, more and more people are working out of their homes, and many of them have their own home-based business. Self-employed individuals that operate their business from their homes usually rely on their homeowner’s or renter’s insurance policy to provide protection in the event of a worst-case scenario. But while your home and personal belongings may be covered, your important business files, equipment, and operations are probably not.
Some of the soundest advice about running a home-based business is that you should always separate your work from your home/personal life, you do not want one to ruin the other. This principle most definitely applies to insurance. As a matter of fact, if you are using your home for purposes that your insurer is not aware of, not only might you not be covered, the activity you are involved with may even invalidate your homeowner policy.
What Types of Insurance do I Need for my Home-Based Business?
The cost for a policy to cover your home-based business can be minimal depending on what products and/or services you are providing. There are so many different types of businesses that can be operated out of a home these days, from selling arts and crafts to website design to building contractor to professional services like CPAs and financial advisors, and each business profession has specific insurance needs.
Here are some of the most common coverages that home-based business operators should consider:
- Business Property Insurance: If you operate a business out of your home, chances are you have some valuable equipment that would be expensive to replace if anything happened to it. For example, a typical home office might have a desktop or laptop computer, cell phone, tablet, printer, desk, filing cabinets, and various other supplies. On top of that, you might have some specialized machinery or equipment that is used to produce a product that you sell, for example. Your homeowner’s policy would probably not cover the full value of the property you use for business, and in any case, this property would not be covered at all if something happened to it when you bring it outside your home.
- General Liability Insurance: All home-based businesses should have liability coverage to protect you in case someone is injured on your property during the course of business. For example, if you regularly have clients, employees, and/or subcontractors in your home office, the liability insurance in your homeowner policy would not cover them. This is where your general liability coverage would fill in the gap.
- Professional Liability Insurance: If you provide any type of service out of your home, then you will probably need professional liability insurance. This is different from general liability insurance, because it covers injuries someone might suffer while you are performing a service. This would apply to service providers such as massage therapists, dog groomers, hairdressers, chiropractors, and many others.
- Errors and Omissions Insurance: If your home business involves providing any type of professional advice, then you will need errors and omissions (E&O) insurance. This coverage would kick in if a client claims to have suffered damages because your advice was inadequate or incomplete. CPAs, financial advisors, business consultants, and attorneys are all examples of occupations where E&O insurance is necessary.
- Product Liability Insurance: If you create any type of product out of your home, you will need product liability insurance. This will cover you if you sell a product with a defect that causes harm to a consumer during the course of regular use.
- Business Vehicle Insurance: If you use your vehicle in your business, it will need to be insured for commercial use. Otherwise, you may not be covered if you were to cause an accident that results in property damage and personal injuries.
- Disability Insurance: If you depend on the income from your home-based business to meet your basic needs, then it would be wise to consider disability insurance. This would cover you if you become disabled and you are no longer able to operate your business.
- Business Interruption Insurance: If you are forced to suspend business activities because of a fire, flood, or another type of covered event, business interruption insurance would cover you for the revenue you lost because of your business closure.
Do not Leave your Home-Based Business Unprotected
If you run a business out of your home, you may not have a landlord or a bank requiring you to obtain insurance for it, but this does not mean you do not need it. Ask yourself, are you willing to lose all you have worked for and empty your bank accounts to pay a claim against you or hire an attorney to defend yourself? The answer is most likely no, and this is why you need to insure your home-based business.
As we have covered, there are a lot of different types of insurance that a home business operator may need, and there are numerous insurance carriers that offer various policies, rates, and coverages. To find the right insurance products for your business, it pays to work with an independent insurance agent. Independent agents have access to several of the top carriers in your state, and they can consult with you to determine which coverages you need so they can shop around to find you the policies that fit you best.