What kind of insurance do you need for your home business?

August 28, 2020

Learn what kind of insurance coverage you need for your home business


A woman working at her home business next to her daughter

Each year, millions of enterprising Americans take their first steps towards their entrepreneurial dreams by starting a business in their own home. But that first step is often more like a leap and there are a lot of questions that must be answered first. Will you sell a product or service? How will you get your name out there? What kind of insurance do I need for my home business? Unfortunately, not everyone remembers or knows to ask that last question. While many people assume that their homeowners insurance has them covered, it is seldom that simple. That's why today, we're talking about home business insurance and how you can find the coverage that's right for you. Read on!

Does my home-based business need business insurance?


There are more than 38 million home-based businesses in the United States today. For many Americans, starting a business from home is an affordable way to bring their ideas into the world. Office space can be cost prohibitive for a brand new business, but with the reach and access of the internet, many new home businesses can be started for next to nothing. 

While working from home certainly has its fair share of benefits, when it comes to insuring your home-based business, there are a lot of things to consider. For example, what is the value of your equipment? Do you plan on having employees? Do you have inventory stored in your home? Will you have clients visiting your house? Will you be performing services at client offices? Will you have to drive to job sites frequently? The answers to these questions will help you get a better understanding of what kind of insurance solution you'll need. 

Regardless of what kind of in-home business you are running, there's a good chance that you'll need at least some sort of coverage beyond what is provided by your homeowners insurance. Unfortunately, many Americans are unaware of the gaps in their coverage, and may assume that their business equipment is covered, or that they have liability protection, simply because they are conducting business in their home. As we'll discuss, this is not the case more often than not. 

Does homeowners insurance cover a home business?


As a general rule of thumb, you should not expect your home insurance or homeowners insurance to provide coverage for your business - even if you run it from your house. That having been said, some homeowners policies provide a very limited amount of coverage for business equipment.

On average, policies that do extend this coverage offer somewhere around $2,000 - $2,500 for business equipment stored in your home. For example, if you have a tablet or laptop you use for work, your homeowners insurance may cover it should it be destroyed in a disaster of some sort. However, it is unlikely that this coverage would extend to your business equipment when it's not actually in your home. 

Furthermore, most homeowners insurance policies have exclusions in regards to a business you run from your home. For example, it isn't likely to cover the loss of data, business records, business interruption, or injuries employees or clients sustain while on your property. 

How can you insure your home based business? 


There are a number of ways you can insure your home-based business. As you can imagine, the solution that is right for you will depend on your insurance provider and the type of business you are running. 

Some homeowners insurance policies may offer some property coverage in the form of additional endorsements to your basic policy. For example, and endorsement might expand property coverage for business equipment to $10,000 or more. 

There may also be business liability endorsements for practices that have very little traffic or visitors. For example, if you conduct a therapy practice from your home, or language tutoring you may be able to find coverage through and endorsement. However, if your home-based business requires frequent at-home visits by clients, or if you often perform a service on-site for clients, you will likely need a separate policy. 

Beyond endorsements to your homeowners policy, some insurance carriers offer specialized in-home business insurance policies. Such a policy would be very similar to that of a standard commercial insurance policy that a large company would have. However, these policies are designed with lower limits and lower premiums to fit the needs of a smaller business. 

Lastly, you may consider a business owners policy, or BOP. Just like homeowners insurance, business owners insurance combines a number of different coverages into a package, like property, liability, and possibly business interruption insurance. However, you can often purchase the property coverage and liability coverage separately. 

Of course, all businesses are different and as such, they require customized options. For example, an IT business that protects client's data may need data breach insurance or increased liability. If you sell products or goods out of your home, you may need increased property coverage to help protect your inventory. That's why it's important to reach out to your insurance provider or insurance agent for more information regarding your specific business needs. 

What are the different kinds of insurance my home-based business might need?


Even if you're running a small operation, there are a number of aspects to running a business that require insurance. Let's take a look at some of the coverages your home-based business might need. 

Property. While many businesses can run a fairly tight ship as far as equipment costs are concerned, it doesn't take much to exceed the possible limits offered by a standard homeowners policy. If you run a business from home, take a moment to look around at the various pieces of equipment and technology you rely on every day. Laptops, printers, scanners, monitors, desktop computers, tablets, and smartphones can all add up quickly - and that's not even counting any data, business records, or product inventory you may have. 

As mentioned, your homeowners policy might offer some limited coverage for business equipment. However, if you have more than a few thousands dollars of equipment, you'll likely need some sort of additional property coverage for your business. 

Liability. If a friend or relative injures themselves in your home, the liability portion of your homeowners insurance should cover the cost of the injury. However, if a client hurts themselves in your home before a meeting, it won't. 

Beyond general liability, there may be other types of liability your home businesses should carry depending on what you do. For example, if you sell a product, there is a chance that at least some units of that product may be defective, and could cause damage to customers or their property. In such a case, you could be held liable for damages and would need additional coverage to protect yourself. 

Additionally, if you perform a service, you may need a more specific type of liability insurance to protect you from claims or damages that occur as a result of your work. 

Business vehicle. Some personal auto policies may provide limited coverage for your vehicle if you only occasionally use it for your business. However, if you frequently use it for business operations or transportation, you'll likely need a separate business policy. Furthermore, if the vehicle is actually owned by the business, a personal auto policy will most certainly not cover it. 

Of course, what is considered "frequent" use for business operations, or "occasional" use is going to vary between carriers. For this reason, it's always a good idea to ask your personal auto carrier about your policies specific coverages before assuming that it will protect business operations.  

Business interruption. One of the greatest benefits provided by many business owner policies is business interruption insurance. If, for example, you are forced to cease business operations because your house burns down, business interruption insurance would reimburse you for the time that you are out of commission (up to the limits of the policy, of course).

A woman working at her home business with her cat

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Read more: Working at home can be great, but it's important to stay productive. Check out our blog for tips on how to do your best work from home!

by Geoff Ullrich

About the Author

Geoff Ullrich is a writer and Content Marketing Specialist at Germania Insurance.