Insuring Your Home Business

Insuring Your Home Business

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. Think about the risks. Do you take a laptop and a cell phone on the road to meet customers? What if they're stolen? What if a client slips and falls at an appointment in your home? What if your product injured someone?

To get the insurance you need, ask 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. Next, read the fine print on your homeowner's policy to find out the restrictions on your business property and activity in the home.

As a home based business owner, two types of insurance cry out for your checkbook: 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 as a home business opportunity. Here's a run-down of what's what.

A business owner's policy (BOP) includes both liability and property damage coverage. Typical 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.

A home office policy is a step down from a BOP. This policy combines 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. Also covered are loss of records, accounts receivable, some off-site business property, fire, theft and personal liability. Many policies don't cover "options" such as floods or earthquakes.

A "business pursuits" endorsement to your homeowner's policy provides the least protection, and isn't recommended for most home based businesses that have customers on site or costly equipment.

Examine your home business opportunity and your assets to determine your net worth, likelihood of business interruption, and liability "red flags." When you've found a policy that's within your budget and covers possible losses, review it yearly to make sure it's still adequate. Just because you have insurance doesn't mean you want to use it. Take steps to protect yourself from losses. Do a few common sense things to prevent crime and disaster like installing smoke detectors, fire extinguishers and deadbolt locks.