One of the smartest moves a business owner can make is obtaining insurance to protect his business assets. Even home-based businesses need the protection that insurance can provide. The type of coverage you choose will depend on the type of home business you run, its scale of operation and the risks you face for financial loss. Here’s what you should know about insuring a home enterprise.
Importance of Business Coverage
Although your home insurance may provide some coverage for business equipment, it isn’t designed to protect business property. If you have equipment in your home that’s used solely for business purposes, i.e. computer, printer, fax machine, etc., or store inventory at home, you’ll need separate insurance to cover these items. You’ll also need separate coverage to protect business documents such as financial records or client’s personal data.
In addition, home insurance won’t protect you against liability claims related to your home-based business. If a client has an accident while visiting your home for business purposes, you could be held liable for his medical costs. If a product your business produces or sells causes a customer harm, you could be sued for damages, resulting in substantial financial loss.
Insurance Options for Home-Based Businesses
There are various insurance options for protecting a home-based business. These include:
Home Policy Rider
For one-person home-based businesses, a home insurance rider may suffice to provide the protection you need. A rider expands the coverage your home policy provides to protect business equipment valued at less than $5,000. This is a viable option for your home-based enterprise if you don’t receive customers or clients at home for business purposes.
In-home Business Policy
In-home business policies offer both business property and liability coverage, making them more conducive for business owners who receive customers or meet with clients at home. In-home business policies are fairly affordable, offer more comprehensive protection than a rider and have higher limits on coverage to protect you against liability claims or loss of business property.
These policies, however, exclude professional liability coverage. If your business provides professional services such as tax prep or financial consulting, you’ll need professional liability insurance to protect you against claims of negligence in the services you provide.
Business Owners Policy (BOP)
For optimal protection for your home business, consider obtaining a business owners' policy. Through a BOP, you can receive the following coverage:
- Protection for your business equipment, inventory and business documents
- Protection against general liability, product liability and professional liability claims
- Business interruption insurance to replace loss of income if your business operations come to a halt temporarily due to a power outage or natural disaster
When selecting insurance for your home business, consider your business risks and the coverage required to protect you against them. If your home-based business operates on a fairly large scale, a BOP may be just what you need to protect you against any eventuality.
Whether you tutor high school students at home, sell jewelry online or run a homebased accounting firm, you need the protection that insurance can provide. For help in selecting the right coverage for your home-based enterprise, call or visit the Hummel Group today.