What Insurance Is Needed For A Home-Based Business?
Dan Levenson August 30, 2016
The opportunity to start a part-time, home-based business has never been greater than it is today. Jobs ranging from IT consultant to Uber driver are just two examples of how many opportunities there are to make money from home or in your spare time.
In fact, according to the 2014 U.S. Census Bureau statistics, there are over 23 million non-employer firms—those who work from home on a full- or part-time basis—operating in the United States.
Working from home has plenty of benefits, of course, but it also comes with risks.
If you operate a home-based business, don’t make the mistake of assuming your personal insurance policies will provide the level of protection you need. Your current policies may not provide adequate coverage for you along with your business activities. Just because you are involved with a part-time business does not mean you are free from risk.
Here are some things the owner of any home-based business should consider:
If you have homeowner’s or renter’s insurance coverage, most policies limit their coverage of business property located at the insured’s residence to $2,500, and $500 for property away from the insured premises.
This amount of coverage may be adequate for a person whose primary business equipment is their computer and cell phone, such as a freelance technical writer or marketing consultant who works primarily from their home. But it may not be enough for a person who meets with clients outside of their home, taking their laptop, LCD projector, and other equipment with them.
Another consideration is where to keep your business property in the first place. The limit for business property usually applies to your house, which is also referred to as “residence premises.” Business property you keep in a separate structure, like a workshop or detached garage, may not be covered at all.
For instance, there would be a gap in coverage for a person who makes cabinets in a workshop. Neither their tools nor their supplies would be covered.
Depending upon your situation, you may be able to get the coverage you need for your business property by adding a business property endorsement to your homeowner’s policy or by getting a commercial property policy.
Liability coverage provides protection for bodily injury or property damage claims made against you by others. Your homeowner’s policy provides no coverage for liability arising out of your business pursuits.
For example, if you were to have customers come into your home and they were injured on your property, your homeowner’s policy would not provide any coverage for the injuries.
Another liability exposure could be someone getting hurt or injured by your product. For example, a person who makes toys for children and sells them at craft fairs could have a problem if a child were to choke on the toy.
Commercial general liability protection will help protect you from these types of claims.
Another potential problem for owners of part-time home-based businesses is liability arising out of their professional advice. A person who does bookkeeping from home could inadvertently make an error, resulting in a large fine from the IRS. Commercial general liability coverage does not provide any protection for this.
A professional liability policy, such as errors and omissions, provides protection for rendering or failing to render services.
There are many considerations when it comes to insuring a home-based business. Many of our clients are often surprised by how affordably they can get the coverage they need so their personal assets are not put at risk. Contact us for a quote today!