Do you need to Insure Your Home Business?
What would you do if disaster struck your home, taking the tools for your home business with it?
Chances are you’d refer to your homeowner’s policy, assuming it protected you and your business.
Sadly, you’d probably be shocked. Most homeowner’s policies limit loss of business property to $2,500, don’t cover losses away from the home, and exclude liability coverage for business-related activity.
There are a bounty of everyday risks that go along with having a home based business.
- Do you take equipment like a computer or phone on the road with you? What if they’re stolen?
- What if a client slips and falls during an appointment in your home?
First things first. Take some time to read the fine print on your homeowner’s policy to find out the restrictions on your business property and activity in the home.
If you determine you need additional insurance, make sure you ask your broker a lot of questions. Think about your inventory, how much equipment you have, whether customers come to your home, what you would do if disaster forced you out of your home temporarily.
As a home based business owner, two types of insurance cry out to you: liability and property damage. Liability protects you against someone getting injured on your premises or by one of your products. Property damage protects against damage to a host of things, from computers to carpets.
You’ll have several policy options. Here’s a quick run down of what you can expect.
- A business owner’s policy (BOP) includes both liability and property damage coverage. Hazards covered include loss of data, software or income; theft; and general business liability. The structure housing your business is also covered, so this might duplicate your homeowners’ coverage. A BOP also provides some off-premises coverage, including liability coverage for products you sell or parts you install. Things like flood protection or insurance for outdoor signs may be optional.
- Another policy is the home office policy. It is a step down from a BOP, combining homeowners and business insurance, eliminating duplicate coverage or gaps. This is a good choice for a company with no more than a handful of business visitors each week and quality computer equipment. It covers general business liability, lost income and ongoing expenses like payroll for up to one year if the business can’t operate because of damage to your home.
- If you don’t have customers on site or costly equipment, a “business pursuits” endorsement to your homeowner’s policy may be a good choice. It provides the least protection, but does offer additional property protection for your home business.
Just because you have insurance doesn’t mean you want to use it. Do a few common sense things to prevent crime and disaster like installing smoke detectors, fire extinguishers and deadbolt locks.