Many Americans start a home-based business because they want to pad their day-job income or perhaps are looking to eventually break free and work on something they are passionate about.
Often, when first starting out, they run their business from home. They may store inventory at home or set aside a room for an office, with their computer, printer and more.
But what if your home is robbed or your business property is damaged? Will your homeowner’s policy cover the risks of a home-based business? In nearly every case, the answer is no.
Nearly all homeowner’s policies clearly exclude business operations, and not having proper coverage in place can leave you with uninsured exposure. This is why you need separate business insurance to cover your home-based business risks. To ensure you protect your business assets, here’s what you need to know.
Business insurance
The first consideration is your business property. Homeowner’s policies usually exclude or provide very limited coverage for any business property in your home. If you have a lot of inventory or costly equipment at home, you’ll need business property insurance that covers losses due to a fire, theft or other calamities.
Typically, a business policy also covers loss of income if you have a covered claim that disrupts your cashflow (for example, if your business inventory burns up in a house fire). Policies may also include coverage for things like valuable papers, damage to property of others, off-premises property coverage and a few other additional protections.
The next consideration is liability. If you’re running a business from your home, it’s unlikely you’ll have customers visiting your property. But if they do and are injured, your homeowner’s insurance would not cover the injury.
General liability insurance would cover their injury, but it also has other features that are more likely to come into play:
- Someone is injured while visiting your home for business related to your company. GL insurance would cover their medical costs and lost income if they are unable to work because of the injury.
- Your business activities or employees accidentally damage someone else’s property. In this case, insurance can help cover the costs to repair or replace the damaged property.
- Someone is injured by property you’ve taken into the field, such as to a trade show or event. Coverage is especially important since many trade show organizers require exhibitors to carry liability insurance.
- You are sued for using a copyrighted image in your advertising without permission. GL insurance could help cover the legal defense costs and potential settlements. This would fall under the “advertising injury” portion of the policy. This also includes libel and slander — making false or defamatory statements in your ads that harm another person’s or business’s reputation.
A business owner’s policy includes the coverages described above and is specifically designed to protect the unique interests and property of a business owner. This package policy provides nearly all the coverage you need. Call us for more information.
Other coverages
You may have noticed above that GL insurance doesn’t cover injuries to someone who used your product. If you’re selling something that could potentially make someone sick or cause injury, you should also consider product liability insurance.
If you provide professional advice, consulting, coding or other non-tangible services, you may also need a professional liability policy. This is also known as errors and omissions insurance.
Also, if you handle sensitive customer data, including credit card information, you may want to consider cyber insurance. It protects your business from financial losses related to data breaches or cyberattacks.
If you have employees, most states require you to carry workers’ compensation insurance.
Depending on the type and size of your business, you may have more insurance needs.
The takeaway
Hoping that your homeowner’s policy will cover your business loss will only leave you frustrated.
Businesses have a much higher risk than a homeowner’s policy allows for, and homeowner’s claims adjusters are likely to quickly deny coverage for business-related losses. Talk to us today to explore your home-based business insurance needs and options.