Insurance for a Home-based Business
Working at Home Does Not Mean One Can Ignore Insurance
Sep 3, 2009
When beginning a home-based business, keeping costs in line is a paramount concern. It may be tempting to believe that basic home-owner’s insurance is enough protection, but it is not. Depending on the type of business one operates from home, it is essential to consider the liability, property, vehicle, and workman’s compensation insurance implications.
The Rocky Mountain Insurance Information Association reports that, “It’s estimated that more than half of home-based business owners are underinsured and the Independent Insurance Agents of America (IIAA) say nearly 40% of those they surveyed are uninsured primarily because they thought their homeowners policy covered their business.”
Homeowner’s Insurance is not Enough for a Home-based Business
For example, a home-based pet sitting business could encounter any of the following situations requiring insurance:
- A client complains that items are missing from their home following a visit from the pet-sitter
- A pet-sitter is injured in a car accident traveling to a client’s home
- A delivery person is injured on the front steps of a home-based business while delivering office supplies
- The house of the home-based business has a power surge following a thunderstorm blackout and computers (and data) are damaged
- Someone breaks into the home-based business office and steals the computers, fax machine, and files
Rules on insurance coverage vary by state and insurance company. However after any of these events occurs is not the time to learn that:
- A home-based business operating in a detached garage is not covered under the rules in many states
- There is a limit of about $2,500 on loss for any property used in a home-based business
- The personal liability in a home owner’s policy is not the same as the general liability required by businesses
- An employee injured while driving the business owner’s vehicle for purposes related to operating the business may not be covered by the owner’s vehicle insurance
Type of Insurance for Home-based Businesses
The U.S. Small Business Administration suggests the following types of insurance for a home-based business.
- General liability
- Product liability if the home-based business involves products for sale
- Professional liability if the home-based business involved offering professional services
- Malpractice insurance for licensed professionals
- Business Interruption Insurance
- Amended vehicle insurance that reflects additional miles or drivers
- Workman’s Compensation Insurance for home-based business with employees
David Colmans, writing for the Chattanooga Times (September 3, 2009), reports three options for the home-based business owner seeking insurance coverage:
- A Homeowners Policy Endorsement – the least expensive option, but it does not include business or product liability
- An In-Home Business Policy/Program raises limits on property damage, includes business liability, and loss of income. These policies vary by carrier and should be investigated before making a commitment.
- A Business Owners Policy-The business owner’s policy, or BOP, is a number of package policies designed to meet the insurance needs businesses. A BOP usually includes coverage for business property and equipment, loss of income, extra expense and liability.
Don’t wait to make the necessary decisions and get the coverage that a home-based business needs. First, talk with the insurance agent that holds the home insurance policy to understand its limits. Ask the agent what options his company has available for home-based businesses. Do your research. Gaebler has several excellent articles on insurance for small businesses.
Ask the attorney or accountant that the home-based business works with for their recommendations. Investigate coverage for home-based businesses available from professional and small business associations.
 |
