Does your home-based business need "business" insurance?

If you are one of the growing number of entrepreneurs with a home-based business, you may find yourself "out in the cold" when it comes to coverage.

In many cases, if your homeowners policy does not outright exclude coverage for business activities, you will find that you do not have the needed protection desired.  The typical homeowners policy only provides limited coverage for business equipment ($2,500), limited liability limits and coverage, not to mention, no coverage for lost wages.

To properly protect your business, there are a couple routes that you can take:

Homeowners Policy Endorsement:

With this approach, we would endorse your homeowner’s policy to increase your basic property limits for items such as computers, as well as obtain additional, albeit limited, liability coverage should someone get injured while on your premises.  In both cases, coverage is extremely limited and unless your operations are considerably basic, it will be inadequate for your needs. 

In-Home Business Policy/Program.

An In-home business policy provides more comprehensive coverage for business equipment and liability than an "endorsed" homeowners’ policy.

These policies typically reimburse you for the loss of important papers and records, accounts receivable records reconstruction, and off-site business property. Some will also include coverage for the income you lose (business interruption) in the event your home is damaged by a covered cause of loss.

As for liability coverage, In-home business policies include broader coverage for higher limits of liability. They also often provide protection against lawsuits for injuries caused by the products or services you offer.

These policies may also allow you to have a certain number of full-time employees, up to three, before your exposure out-grows this product.

These policies typically vary by Insurance Carrier, and they often have very restrictive covenants. 

Businessowners Policy (BOP).

This is a standalone policy that was created specifically for small-to-mid-size businesses. They often provide comprehensive Property, loss of income and extra expense, as well as Liability coverage with limits of up to $2 million. These policies typically start at $500 and build up from there.

Workers’ compensation, health or disability insurance

These three exposures require separate policies geared towards their unique coverages. They are often required if you have employees. Something we would need to talk about in more detail.

Word of warning:  My small startups go the route of hiring "1099 Employees". This can be a slippery slope regarding State workers Compensation requirements. Another item that we would need to talk through.

Automobile Coverage

If you are using your car for business activities -- transporting supplies or products or visiting customers -- you need to make certain that your automobile insurance does not exclude these activities. Often, a Personal Lines Insurance Carrier will look to exclude business related activities … pizza delivery, livery … from coverage. If this is the case, a separate Business Automobile policy would be required. Let's take a look at your policy.