Do You Need Home-Based Business Insurance?
Dan Levenson October 25, 2016
If you’ve just started running a small business out of your home, you might not know about the advantages of home-based business insurance.
Many entrepreneurs believe their homeowners’ insurance will also cover their home-based businesses. However, this is not always the case. Most homeowners’ policies exclude home-based businesses. That means you won’t be covered for lost data, liability, or lost income.
However, there are many home-based business insurance options out there. Which option is right for you will depend on your specific business circumstances.
Determining If You Need Home-Based Business Insurance
In order to determine if home-based business insurance is right for you, it’s important to examine your current homeowners’ policy carefully. Before buying additional insurance, you should understand the coverage you already have.
While looking through your homeowners’ policy, consider the following questions:
- Make sure your homeowners insurance covers business equipment. Some homeowners’ policies explicitly exclude home-based business equipment. What’s more, some policies consider operating a business out of your home to be a violation of the policy terms.
- Do you frequently work from home even though you have a physical office you can go to? If this is the case, you may need to purchase additional coverage so you’re protected in the event of a work-related accident.
- Do you often have employees or business contacts in your home for business-related purposes? Many homeowners’ policies exclude all injury claims related to work. If you often have employees working at your house, you may need to purchase additional coverage.
- If you routinely store business data in your home, you’re a prime candidate for home-business insurance. Lost data is not covered in most standard homeowners’ policies. Moreover, since technology failures and security breaches are a problem many companies face these days, you might want to consider additional coverage to protect yourself against these threats.
Home-Based Business Insurance Options
So you’ve answered the questions above and determined you need home-based business insurance. Now it’s time to decide what type of policy you need.
According to Entrepreneur, you have three options:
- Adding a rider to your homeowner’s policy,
- Buying an in-home business policy, or
- Purchasing a business owner’s policy.
Adding a rider to your existing homeowners’ policy is by far the cheapest options. This will allow you to expand your homeowner’s or renter’s policy to cover the company. This type of rider will only cost you an additional $100 a year, but it will add an additional $2,500 in coverage. This type of coverage is ideal for one-person businesses that do not have a lot of valuable equipment or overhead.
For a larger business, an in-home business policy might be more appropriate. These policies cover many more contingencies such as theft of funds or a critical data loss. They are designed to cover up to three employees. The policy covers injury liability as well as most business equipment.
In-home business policies have to be purchased from a home insurer or a specialty company. It costs between $250 and $500 a year to add an additional $10,000 in coverage. Before buying an in-home business policy, check the requirements in your state. Each state has different rules governing which types of home-based business insurance policies can be offered.
A business owner’s policy is designed for businesses that need over $10,000 in coverage. This type of policy will cover liability, the loss of critical data, malpractice, loss of income due to the business interruptions, and the loss of business equipment. The cost of a business owner’s policy will depend on how much coverage you need. At a rate of $500 a year, you can buy $2 million in coverage. Prices go up from there.
To learn more about the benefits of home-based business insurance or to get a business insurance quote, contact us today.