Home-Based Business Insurance: When Do I Need It?
The materials available in the Knowledge Center are for informational purposes only and not for the purpose of providing legal advice. You should contact legal counsel to obtain advice with respect to any particular issue or problem. Use of this website or any of the links contained within the website do not create representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
Many people dream of working at home. Have you achieved that dream? Starting a home-based business can be both exciting and terrifying. In the case of companies like Apple and Mary Kay, it can also be an extreme success.
You have so much to think about as you start this venture: where to put your office, the name of your company, insurance… That’s right. You may have assumed that your homeowner’s insurance would cover your new business, but don’t check that box just yet. In fact, most homeowner’s policies will not cover a home-based business. Some insurance companies even consider an unreported business a violation of your homeowners policy. Read your policy to find out your coverages.
What To Look For In Your Homeowners Policy
Your homeowner’s policy probably covers business equipment to a certain degree. This could include the laptop you take to the office, your briefcase, etc. Yet, when this equipment is for a home-based business, your insurance fails to cover it. Nothing in your office at home would be covered by your homeowners policy.
Let’s say you still have an office outside of your home. Do you still work from home regularly? Then your homeowners policy will probably not cover you while working from your house. Any injury or other incident would be paid for out of your own pocket.
Perhaps while you are working from home, clients visit your home to do business. These third parties are most likely not covered by your homeowners insurance. This means that if your business client slips and falls in your home, they could sue you or ask you to pay for their injuries. That payment would not be covered.
Your homeowners policy may cover business data at your office, but not your home-based office. Data breaches or computer malfunctions can lose valuable information for any business. A small business can be especially hurt by any breach, and are often the target of hackers.
2 Types of Insurance
-
Rider: This is an addition to your homeowners or renters policy, which usually offers third party liability and a small amount of business equipment coverage for your home. This option works best for very small business, even a one man show, with few visitors, a small amount of equipment and not much chance of a liability claim.
-
Business Owner’s Policy: If you are looking for “full coverage” for your home-based business, a BOP is your best bet. This coverage will have a higher limit for business equipment or data loss. A BOP can also protect you from liability lawsuits, as well as malpractice. This is a good choice for larger businesses with a lot of inventory and products and a high risk for liability claims. Learn more about a BOP through Infinity here.
Driving For Work
If your home-based business requires that you drive for work, you will need a separate commercial vehicle policy. Your normal auto policy will not cover a vehicle with which you conduct business. Learn more about commercial vehicle policies through Infinity here.
You’re not alone. More and more home-based small businesses are opening each year, according to the SBA. Check out their resources for starting a home-based business here.