Not Having Home Business Insurance Can Put Your Business At Risk
Recent national statistics show that three out of 10 homeowners run a business out of their home. Surprisingly though, most home business owners are underinsured, with more than half having no business insurance at all.
This is because many assume theyre covered under their home insurance. Although some policies may offer limited coverage, it most likely isnt enough to protect a home business and its assets should anything happen. Here is some basic insurance information every home business owner should know to help safeguard their business.
SEE ALSO: What Is Covered By Basic Home Insurance?
Your Homeowners Policy Isnt Enough
The first mistake a home business owner can make is to assume their homeowners policy will also cover their business assets.
This is usually not the case, with some policies actually stating they will not cover a home business and consider the operating of one a violation of their terms. So, say there is a fire in your home, and your work computer and other equipment were lost in the flames. Your home insurance company can refuse to replace these belongings because they are considered business property.
Policies that do offer some coverage typically only cover a maximum of $2,500 for damages occurring on the property and $250 for damages off-site. That might be enough for a small business with little inventory, but keep in mind, homeowners policies will not cover lost data, lost income, or liability.
Cover Your Liabilities To Save You Legal Troubles
Injury to houseguests may be covered by a homeowners policy, but clients, business visitors, and even delivery men are different stories. Without proper home business insurance, you are liable for any injures or damages that occur due to business related activities.
Luckily, there are several types of liability policies that will protect you:
SEE ALSO: Home Insurance Advice: Why You Need Umbrella Insurance
- Home business liability: covers accidents or injuries to anyone on your property for business purposes, and injuries or damages you cause while on business outings
- Product liability: covers injuries or damages due to a product you make or sell
- Professional liability: covers accidents or injuries caused by a service you provide
- Workers compensation: required in some states with businesses having one or more employees, covers accidents or injuries to employees due to work related activities
- Business car/automobile policy: covers you or your employees while driving around for your business
You Have Three Main Purchasing Options
So which is the best type of insurance to protect your home business? Depending on your business needs, size, and type, one of these three home business options should be right for you.
1. Endorsements to your homeowners policy
With homeowners policies having little to no protection for home businesses, some insurance companies offer options for additional coverage. These endorsements still only offer limited protection, though, raising the coverage to around $5,000, and covering some liability. This option is more suited to smaller home businesses with limited liability exposure and a minimum amount of equipment.
2. In-home business policy
This policy provides more coverage for both liability and business equipment. Depending on your provider, in-home business polices will often reimburse you for the loss of important data, damage of off-site business property, and loss of income in the event your home is damaged by a covered cause. This policy is geared more toward growing businesses with few visitors and equipment.
3. Business Owners Policy
A business owners policy (BOP) is ideal for small to medium sized businesses needing more than $10,000 of coverage. A BOP offers the most coverage for home businesses, covering everything in an in-home business policy, but on a broader scale.
If you are still unsure about which policy is right for your home business, talk with an insurance provider to discuss your options. No matter what policy you choose, though, keep in mind that failing to follow all city, state, federal, and health code regulations could void your policy.
Also, as your business grows, look over your policy often to determine if youve outgrown your coverage and need to purchase more. For example, if you started with a homeowners endorsement to cover your small cupcake business, and demand for your cupcakes suddenly triples, potential customers might start swarming your home. In this case, you might want to think about upgrading to a policy with more liability coverage. Remember, the more your business grows, the more coverage youll probably need.