Home Business Insurance Basics

Technology and social trends have driven a wave of telecommuting. Many of us work at home at least on some days while some may work from home all the time. For that reason, more and more homes contain a designated office area; with increasing frequency that area is a room.

If the work you do is not for your own business you can often amend, or endorse, your Homeowner, Condominium Owner or Renters Policy to extend liability protection for incidental office exposures. Modifying your Homeowner policy is also an easy and inexpensive way to increase the limits for coverage of business property. A standard limitation is usually $2,500 for loss to business property on your residence premises but only $250 for business property away from your residence. Many insurers will, in exchange for some small additional premium, allow your Homeowner Policy to cover $5,000 or $10,000 of business property. And for a telecommuter, that's often the best solution.

Home Based Business

According to the Casey Home Based Business Study, 62% of all small business are home based and this includes real estate sales and sales and distribution of products as a part time business. If your home based business is not your main source of income you still need to consider additional risks which may not be covered, even under an amended Homeowner policy. Here are a few:

  • Business-related personal property (equipment and furniture) in excess of the Homeowner Policy limitation - both on and off premises
  • Inventory you store or have on hand
  • Business property of others while in your care or under your responsibility
  • Accounts receivable
  • Valuable papers and records
  • Electronic data coverage
  • You may need liability to extend to personal injury, products and completed operations, incidental contractual liability, and general commercial liability.
  • Automobile - If you are driving people around for business reasons, transporting supplies or products or visiting customers your personal auto policy may not provide coverage.
  • Most of these additional risks and more can be picked up through a Home Based Business policy. These policies usually allow for up to 3 employees and will allow more adequate limits of protection for liability and property.If your home business is your primary source of income you will want coverage for business interruption and extra expense. Fortunately, this protection is usually included in a Home Based Business policy. There are a few other kinds of insurance you should be thinking about as well.
  • Disability Insurance - If you become disabled and are unable to work and generate income, this insurance will help to keep you "paid" during that period. It won't cover ongoing business expenses, however.
  • Life Insurance - Many employers provide at least some life insurance protection to their employees. Since you are the employer, you are on your own on this one. Life insurance is also used as a vehicle for perpetuating a business in the event of the death of an owner; this is sometimes known as Key Man Life.
  • Health Plan - The same thing applies here as to Life Insurance. If you don't have an employer supplying or subsidizing this important protection for you, you'll need to get it on your own.
  • Workers Compensation -- All states require employers, even home based ones, to purchase Workers Compensation if they have employees. Workers compensation insurance offers a schedule of benefits for employees unable to work because of a job or workplace related injury or illness.

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