The day has finally come – you’re ready to start a home-based business. This has been a longtime goal, and now you’re excited to finally see it become a reality. Everything’s coming together and you’re almost ready to roll, but there’s one thing missing: insurance for your home-based business. You might wonder if your home-based business is covered by home insurance, and that really depends on your policy. You may have limited coverage for business property, but chances are your home insurance won’t be enough to protect you from all the risks you’ll face as a business owner.
So, how do you insure a home-based business?
There are a few options. We’ll explain three different ways to go about insuring your business and go over which one could be right for you.
Three ways to insure a home-based business.
Option One: Homeowners’ insurance endorsement.
Home insurance only includes a limited amount of coverage for business-related property, but you can add to that coverage with an endorsement. An endorsement is basically an addition to your policy that alters your coverage. It can add coverage, change the limits, and so on. A home-owners endorsement will increase the limits of coverage on our business equipment and property.
There’s one catch, though:
A homeowners endorsement for your business may not be ideal if your business has employees or clients coming to your home – that creates a lot of liability, and a homeowners endorsement might not be enough. And if your business includes a lot of valuable or expensive equipment or inventory, an endorsement still may not provide enough coverage to protect you against financial loss if your business-related property was destroyed.
Option Two: In-home Business Policy.
An in-home business policy can specifically protect your business. It gives you more extensive coverage for your business equipment and inventory, and it also gives more liability coverage.
Option Three: Business Owners Policy.
A Business Owners Policy, also known by the nickname BOP, bundles property insurance and liability insurance into one policy, which is convenient. It may also help cover a loss of income if you have a business interruption and help with extra expenses accrued because of a loss. Of the three options that we’ve gone over, this is the most comprehensive. BOPs are meant for small to mid-sized business, so your home-based business will probably have to meet some requirements to be eligible for a BOP.
Note: BOPs won’t cover workers’ compensation insurance, health insurance, or disability insurance, so you would have to get those separately if they’re applicable to your business.
Save money on your home-based business insurance.
How to insure a home-based business.
Okay, right about now you’re probably thinking that all of that’s great, but how should you insure your specific business? All businesses are different, so they all need customized insurance. To figure out which of the above three options are right for you, you’ve got to evaluate the value of your business’s property and the risks you face.
Check out the following questions to figure out which option might work for you as you’re buying business insurance:
- What’s the value of your business equipment and inventory?
- Take an inventory of all of the equipment, tools, and supplies that you’ve got for your business. This will help you get an idea of how much all of your business-related property is worth (and therefore how much insurance you need for it.)
- Do you provide services that create liability?
- Do you have any professional liability that could result from a mistake, error, or omission? Do your clients rely on your advice to the point that they could blame a financial loss on your guidance?
- What would happen if your product was faulty or didn’t work?
- Do you ever have care, custody, or control of your clients’ belongings?
- Do you store inventory at your home?
- Make sure to keep a detailed list of everything that you sell, including the materials required and the products you’ve made.
- Do you drive at all for your business?
- Any business autos need to be properly insured. Check with your agent to see if your personal vehicle is covered for business use under your auto insurance policy. If your personal car insurance doesn’t provide enough coverage, you might need to think about getting commercial auto insurance.
- Do you employ people?
- You’ll need to check and see if you need to get workers’ compensation insurance.
- Do your employees go to your clients’ homes?
- You’ll need to protect against employee dishonesty.
These questions can help you figure out which insurance coverages you’ll need to protect yourself from the risks that you face. Common coverages for home-based coverages include business personal property, professional liability, business income insurance, personal and advertising injury, loss of business data, crime and theft, workers’ comp, and commercial auto insurance. Now, you might not need all of these coverages. Like we said, every business is different.
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If you’re not sure exactly what kind of insurance you need for your home-based business, we would be happy to help. We can help you figure out what risks you face and what coverages are right for you. And if you want to get a home-based business insurance quote, all you have to do is fill out our online quote form or give us a call today. We’ll get to know you and your business so you get insurance that’s customized to your specific needs.