Home-Based Business Insurance

Operating a small business from home is growing in popularity and is a cost effective way to start up. Be aware however that basic homeowner’s insurance won’t cover the activities of a home business. Robberies of inventory or liability related to your products or services you sell may fall outside the purview of the most homeowner’s insurance, so you may need an additional business insurance policy.

Here’s a scenario for anyone running a home-based business: The UPS guy makes a business delivery to your house, but slips, falls, and sues. Are you covered by your homeowner’s or business insurance?

There’s a good chance the answer is no, and that’s just one example of why owners of home-based businesses need to seriously consider their insurance needs.

Business equipment and inventory losses beyond $2,500 will not be covered by the typical homeowner’s policy should you suffer a loss. In the same way, if you see clients at home and they suffer an injury like our UPS guy did in the opening paragraph, you’ll need some kind of business insurance coverage to protect you.

Three levels of policy coverage

Coverage options may vary, but generally speaking you have three “upgrades” to select from, depending on your business and your exposure to risks.

At the “bare bones” level, you may be eligible to get a rider on your homeowner’s policy to cover equipment and inventory beyond $2,500 or whatever amount is included in your standard homeowner’s policy.

In some cases, you can bump that $2,500 up to $5,000 for as little as $25 per year. Overall, coverage can be increased to $10,000.

In the same way, you can add a liability endorsement to your homeowner’s policy that would cover our UPS guy and a few other business visitors. However, adding the endorsement is limited to home-based businesses that receive very few visitors at home, like freelance writers.

You need to check in your state to see how far you can push this before you need to go to the next step in this insurance progression.

In-home business insurance policies

When adding riders and endorsements to your homeowner’s policy won’t cover the amount of equipment or inventory you keep in your home, or you need better liability coverage, there are in-home business insurance policies available.

Additional areas covered by these kinds of policies would include off-site property, loss of important documents, accounts receivable, and perhaps some loss of income if you suffer a disaster or fire that shuts you down.

Further, these policies may cover a few employees that you might have working at your home. They also give you broader liability coverage.

Standard business owner’s policy

The top level of coverage is a standard business owner policy. This is really the same coverage a brick-and-mortar business would carry and delivers broader coverage than a policy written specifically for a home-based business.

Along with everything you need to consider in order to purchase sufficient coverage for your home-based business, you also need to check your automobile insurance to see if you’re covered while you’re out driving for your business. Further, if you have employees, none of the policies mentioned here cover workers compensation, health, or disability insurance.

Summary

You can get a rider to your homeowner’s insurance that will extend coverage to some business activities, but the ideal solution is a home business insurance policy. In addition to covering basic liability and theft, it can compensate for the loss of key documents or equipment.