Insuring your Home-Based Business

Many businesses begin in the home. In fact, more than half of all small businesses in the United States are home-based. You may have one yourself – home salon, tax preparation, cosmetic sales, jewelry, designer, etc. There are many benefits to having a home-based business but setting up headquarters in your home doesn’t mean your homeowner’s insurance will adequately protect your operation. Just like any business, you will require the right insurance coverage to be in place.

It may seem like your home-based business would be covered by your homeowner’s insurance, but a typical homeowner’s policy may only provide a small amount of coverage (usually covering equipment) — and it won’t offer liability protection or cover you for lost data or income.

Coverage Options

Homeowners Policy Endorsement

Many home-based businesses depend on equipment like computers and printers. Unfortunately, most homeowner’s policies provide a very low limit (typically around $2,500) for equipment on the residence premises that’s used for business purposes. Business owners may be able to double or triple that limit by purchasing an endorsement for an additional premium.

Business Owners Policy

Businesses that need more coverage can choose a business owners policy (BOP). A BOP is a commercial package policy designed for small businesses. It includes commercial property, business income, and general liability coverages.

The general liability section covers claims for bodily injury or property damage, including claims against the business that arise out of its products or completed work. The liability protection on your homeowner’s policy covers certain incidents that happen inside your home, but it does not extend to home-based, business-related activities. For example, if a customer comes to your home to exchange payment for goods or services and suffers an injury. **You should also be careful if you’re using your home for activities that your home insurer isn’t aware of. This may nullify your homeowner’s personal liability coverage.

Not sure if you’re fully protected? Give us a call to discuss the insurance needs of your home-based business.