One of the biggest reasons owners do not carry adequate business insurance for their home based business is because they do not know they need it!

Majority of people who own a home carry a homeowner’s insurance policy. However, very few home based business owners have coverage for their business. Most home based business owners assume they are covered from their homeowners policy, but this simply is not true.

 

What Is Home Based Business Insurance?

Let’s start here. A home based business is any business where the primary office is located out of the same premise that the business owner lives. That seems pretty straight forward, so what is the insurance part? We are glad you asked! A home insurance policy offers a small amount of coverage for things like books, tools, insturments, etc that may be necessary for a business, or occupation. However, this limits are often not enough. The insurance portion of home based business coverage is designed to cover the business beyond what a homeowner’s or tenants policy would.

 

Can I Claim For My Business Under My Homeowners Policy?

This happens all the time where individuals try to file a claim under their homeowners or tenants policy even though they have not disclosed or do not have a proper home base business policy. The insurance company is able to refuse the claim or void the coverage if this information is not disclosed or the proper coverage is not in place. For instance, if you teach guitar lessons out of your home and one of the students breaks one of the guitars, you may be denied coverage for not disclosing that you ran an operation out of your home or only receive the coverage limit from your homeowners policy, which likely won’t be enough. This is the case with a lot of these examples as your homeowner’s or tenants policy is not responsible to cover business related damages or losses and often won’t respond or will not cover the full amount.

 

How Do I Get Home Based Business Insurance?

There are several options when it comes to insuring your home based business. In order to make sure you have the proper coverage it is always best to discuss with your broker, who can advise based on your operation which of the following makes the most sense for you.

Add An Endorsement To Your Homeowner’s Policy

Adding an endorsement or a rider to your current property policy that will provide additional coverage for your home based business is definitely the least expensive option. However, the additional coverage you receive is very minimal. This extension of insurance coverage is best suited for a one-person business with a home office, who does not have a lot of valuable equipment and does not have clients come to their home office. If a fire or other disaster occurs it would not be a major loss for the business. This type of coverage may be appropriate for home based businesses like accountants, or sales people who do not store an inventory at home and simply use a home office. So why is this important to have? Suppose the delivery man has a package for your business and is coming to the door and he slips and hurts himself. Under your homeowners policy alone there is no coverage for those damages, you need to add the home based business endorsement to your policy in order to protect yourself against instances like this.

Home Based Small Business Insurance Policy

Another option is to take out an entirely separate policy for your home-based business. This option covers far more than the endorsement above and as such it yields a higher premium. This policy will cover your inventory and equipment, as well as liability for injury and even employees should it be required. A home based business policy is geared towards businesses who may have clients coming to their home, or who have a large amount of inventory stored in their home. A good example would be a retailer who sells clothes out of their home. If something happens and all the inventory, say $10,000 in clothes is damaged they would have a loss of income of $20,000 – $30,000. You would need a business policy to cover that loss of income.

Business Owner Insurance Policy

The final option is to take out a business owner insurance policy or a commercial insurance policy, the same as what any other business owner would need. Of course this is the most expensive option but it also provides the best coverage. The difference between this option and the option above is this will cover the entire property and operations not located on the property. The limits available on this policy are much higher with more flexibility. This type of policy would be appropriate for a business like a contractor or landscaping company who has a home office but also has a lot of equipment, additional employees and is travelling to different jobs. It is important to note that with some businesses you may require additional coverage for commercial vehicles, errors and omissions insurance, etc.

 

Why Is A Home Based Business Insurance Policy Important?

Covered by standard homeowners insurance policyCovered by home based business insurance policy
General Liability

Yes

Yes

Inventory

No

Yes

Liability from business operations

No

Yes

Business interruption / loss of income

No

Yes

Legal expense

No

Yes

Work computer or laptop

No

Yes

 

Looking to find out more?

Contact one of our license insurance brokers today at 1-800-361-0941, and they will be happy to discuss home based business insurance with you!