Did you know that, according to the Small Business Administration, more than half of all businesses in the United States are based out of the owners’ home?
Many of these entrepreneurs assume their homeowners insurance will step in if they ever experience a property loss to their business equipment or a liability claim. Unfortunately, that simply is not the case.
For example, did you know that if a delivery person was injured at your residence while dropping off a business package, that he or she would most likely be excluded from coverage on your homeowners policy? Or that if customer information was stolen or destroyed from your home computer that you would not receive assistance from your homeowners insurance company to recover the data?
Below is some insight in determining if your home-based business needs insurance coverage and where to properly obtain it.
If you have any questions at all on coverages, options or pricing, please don’t hesitate to reach out to our office.
Do I Need Coverage?
Determining whether or not you need coverage is the first step in properly protecting your business. The following questions will provide some insight into whether or not you need additional insurance coverage:

  • Does your homeowners policy limit coverage of any business equipment? Most homeowners policies will either provide a small sub-limit for business equipment or exclude coverage completely.
  • Do you have an office, but work from home regularly? If you regularly work from your home, you may need additional coverage for protection against work-related incidents that could occur in your home.
  • Do clients, vendors, or employees visit your home, or do you visit other people’s homes as part of your operations? Injuries to a third-party at your residence for business purposes are surprisingly not covered by most homeowners insurance policies.
  • Do you store vital data or customer information electronically at your home? Most homeowners insurance policies do not cover lost business data, so if you have a disaster at your residence, you may be forced to recover that information on your own.

How Do I Obtain Coverage?
Home-based business owners typically have three types of business insurance options to consider. The policy you choose will depend on your business’ size and type, how often you have business visitors to your home and your exposure to liability, among other factors. The three types are:
Rider or endorsement to your homeowners insurance policy. Some insurance companies will allow you to add coverage for a minimal cost to your homeowners policy. However, it should be noted that the coverage provided is extremely limited for property coverage and liability protection. While it may be appropriate for a small one-person operations with limited risks, keep in mind that you could still be on the hook for a large liability loss.
In-home business policy. This type of policy typically combines the homeowners and business coverages into a single policy. While the policy does provide some additional protection for lost income, they are still usually pretty limited with liability protection and exclude any errors and omissions coverage.
Business owner’s policy. This type of policy is by far the most comprehensive for business owners. In addition to higher liability limits (usually $1,000,000 per occurrence), they provide much better coverage for claims like loss of business equipment, loss of records and data, lost income due to a claim, and even some secondary auto coverage (non-owned and hired vehicles). Depending upon your type of business, the coverage can be fairly inexpensive as well. Most policies start at $500 in annual premium.