How to Insure Your Home-Based Business

Entrepreneurship is a hallmark of the American dream. In today’s world of 24/7 connectivity, more and more individuals are operating a full or part-time business from their homes, allowing them to “be their own boss.” Whether it’s in-home child care, IT consulting, bookkeeping services, embroidery orders, an online business, or anything else based in your home, it’s important to make sure you’ve adequately insured your business to protect yourself and your finances.

A word of caution: some individuals operating home-based businesses mistakenly believe that their homeowners insurance covers all their home-based business insurance needs. In reality, homeowners insurance covers little to none of your home business risks.

Here are five critical types of insurance to consider for your home-based business.

Business property insurance protects your business equipment (such as computers, printers, machinery, etc.) in case anything is lost, destroyed or stolen. In addition, business property insurance can also provide coverage to replace lost income if you’re unable to operate your business due to damage to your home (such as a fire, flood, hurricane, or other disaster).  

Business/commercial liability insurance protects you in a couple of key ways:

• If someone is hurt or injured while visiting your home in a capacity related to your business.
• If someone gets hurt while using a product or service your business provided to them.

Liability policies provide coverage up to a stated limit, such as $100,000. Policy limits vary based upon your needs and risks.

A commercial umbrella policy provides additional coverage to protect you if you’re held liable for a loss that exceeds the limit of your underlying liability policy. For example, say someone is injured while visiting your home related to your home-based business, and their resulting medical bills add up to $175,000. If the limit on your liability insurance policy is $100,000, then your umbrella insurance policy would cover the additional $75,000 in medical bills.

Many entrepreneurs use their personal vehicle to conduct business-related tasks, such as calling on customers, making deliveries, or traveling to the airport. However, it’s important to check your personal auto insurance policy to see if it covers any accidents or damage to your vehicle that occurs while you’re on business. Depending on your type of business and the kind of vehicle you’re driving, you may need to purchase a separate business auto insurance policy. Talking with a knowledgeable insurance agent can help you determine the right auto insurance coverage for your home-based business.

Workers’ compensation insurance helps protect your business from financial loss if an employee of your business is injured or gets sick due to a work-related incident. There are two main factors you should consider when evaluating workers’ compensation insurance for your home-based business:

• If your home-based business is incorporated, workers’ compensation insurance can cover you if you’re unable to work due to an injury you suffered while at work.
  
• If you have one or more employees at your home-based business, workers’ compensation insurance covers you if an employee needs medical treatment and income replacement following a work-related incident.

Each state has its own set of laws governing the use of workers’ compensation insurance, so it’s important to talk with a knowledgeable insurance agent to understand how workers’ compensation may apply to your home-based business.

As your home-based business grows and changes over time, be sure to let your insurance agent know. For example, if you purchase new business equipment, grow your inventory, or have additional business-related “foot traffic” in your home, these developments can change the effectiveness or exceed the liability limits of your existing insurance policies.