Running a home-based business comes with unique risks not faced by traditional brick-and-mortar companies. From potential accidents involving customers on your property to catastrophic events that damage your home office, there are many scenarios an entrepreneur needs to plan for. Having the proper insurance coverage is crucial, but sorting through the options can be confusing. This guide breaks down the key types of home business insurance available and how to determine what’s right for your needs and budget.
What Home Insurance Doesn’t Cover
Before exploring specific business policies, it’s important to understand that standard homeowners or renters insurance likely falls short in fully protecting a home business. These policies are mainly intended for personal liabilities and possessions. While they may provide limited coverage for incidental business activities – generally around $2,500 for equipment and up to $500,000 liability for bodily injuries – anything beyond small scale or part-time ventures requires enhanced or dedicated coverage. Relying solely on personal insurance could leave you severely exposed.
Top Three Home Business Insurance Options
Homeowners Policy Endorsement
For very small enterprises with little risk, a homeowners endorsement remains a popular starting point. These riders can be added to existing policies for generally $20 per year or less. Exact coverages vary among insurers, but commonly include:
- Increased business property limits up to $10,000 or $15,000.
- $500,000 or more coverage for bodily injuries occurring on property.
- Expanded liability for commissioned professionals and limited products/completed operations.
Homeowners endorsements work best for businesses earning under $5,000 in annual revenue. Common examples include independent contractors, at-home daycares, and direct sellers.
In-Home Business Policy
For larger home enterprises, an in-home business policy delivers more substantial coverages at an affordable price, generally under $300 per year. Compared to endorsements tied to homeowners policies, in-home plans are standalone with specialized protections like:
- General liability insurance covering bodily injury, property damage, personal injury and advertising injury claims up to $1 million or more per occurrence and aggregate.
- Replacement cost coverage on business equipment and inventory up to policy limits.
- Coverage for accounts receivable, valuable documents, newly acquired business personal property, and some business income loss from covered causes of loss.
- Limited coverage for business property temporarily away from home, like contractors equipment off-site.
In-home business policies suit entrepreneurs with higher earnings and a need for more complete insurance beyond basic homeowners liability extensions. Pet groomers, photographers, consultants, and tradespeople commonly gain value from these plans.
Business Owners Policy (BOP)
For larger enterprises earning $100,000 or more annually, a business owners policy delivers the most customizable protections. BOPs bundle commercial property and general liability within one convenient package. Unlike endorsements or in-home policies tied to a residence, BOPs follow registered business entities without geographical restrictions.
Standard coverages include:
- Blanket limits for business property based on eligible square footage.
- $1 million or more general liability per occurrence.
- Business income loss stemming from covered, causes of loss like fire, theft or vandalism.
- Additional expense to continue some operations during business interruptions
A major advantage of BOPs lies within addon options unavailable elsewhere, including:
- Employment practices liability shielding against various employee lawsuits
- Commercial auto insurance covering business vehicles
- Data compromise, cyber liability, and identity recovery services
- Contractor and landscaper equipment breakdown protection
- Special coverages for healthcare practitioners
For these reasons, BOPs appeal most to formal incorporated businesses with significant assets at stake. Retailers, professional service firms, contractors, and manufacturers gain substantial value from the highly customizable and portable coverage.
Evaluating Your Risks
With the basics of each option covered, conducting an exposure assessment represents the next key step towards securing suitable insurance. Ask yourself these types of questions:
- Do you require general liability insurance? Customers entering your home raises injury exposures. Traveling for business reasons also poses third-party liability risks.
- Does your business rely on expensive equipment? Property insurance can replace stolen or damaged tools unavailable for conducting revenue-generating work.
- Do you employ any workers? Most states mandate workers compensation insurance upon hiring even one employee. Failing to carry adequate coverage leads to severe fines and penalties.
- Does your business provide specialized services or advice? Errors and omissions policies help shield against negligence claims involving financial harm without bodily damage. Common examples include consultants, IT professionals and creative service providers.
- Do you operate commercial vehicles? Non-personal autos like vans and pickup trucks may need commercial registrations and coverages.
By identifying your unique risks, you can then pinpoint suitable policies providing adequate coverage levels while avoiding unnecessary premium costs.
Purchasing the Right Policy
Once you decide standard homeowners insurance falls short and determine the necessary coverage types to protect your home enterprise, here are smart tips for actually obtaining suitable protection:
First and foremost, check with your homeowners carrier about options right from your incumbent insurer. Multi-policy discounts may apply, and comparisons help determine if their offerings match your risk profile. Be wary about large gaps between endorsement and standalone policies – a huge premium jump likely signals you require expanded coverage for proper protection.
Secondly, get quotes from other insurers for comparison shopping. Independent agents add value by presenting alternatives more cumbersome through direct contact. Don’t hesitate to ask questions – they should explain why certain options get recommended over others.
Thirdly, don’t limit yourself to local agents. The internet simplified purchasing insurance, enabling national reach from top direct sellers like Progressive, Hiscox and Next Insurance. Chubb, Travelers, The Hartford and other carriers mainly use independent agents while others like State Farm utilize a captive model. Cast a wide net to find the sweet spot of premium affordability and coverage adequacy.
Lastly, check out modern online insurance marketplaces like CoverHound, Insureon and Next Insurance. Backed by strong venture investment, these digital storefronts simplified comparing policies from multiple insurers by answering a few questions. Their appetite mainly focuses on Main Street business risks less suited for complicated broker negotiations. Easy online application and certificate delivery saves entrepreneurs time when protecting their venture.
In Closing
Running a home-based business brings financial freedom matched by increased risks from inviting the public onto private property or utilizing commercial equipment off-site. Review your exposure to liability claims, property damage and business interruptions to decide if your existing homeowners insurance holds up. Consider endorsements to expand this baseline protection or explore standalone policies like business owners packages offering extensive customization. Shopping around and asking the right questions ensures your entrepreneurial endeavor enjoys safety from preventable disasters striking the uninsured.