Insuring a Home-Based Business
Slightly more than half of U.S. businesses are home based, and people who run businesses from their own homes often assume that their homeowners insurance provides sufficient coverage.1 This misconception may expose them to a considerable amount of risk.
With standard homeowners insurance, the coverage for business equipment such as computers is often limited to $2,500, and business liability is typically excluded altogether, so it's easy to see how the owner of a home-based business could end up underinsured. Fortunately, some options are designed to help protect your venture and your income.
If your business activities are somewhat limited, a basic rider or endorsement that expands the policy limits for business property losses can sometimes be added to your existing homeowners policy, which might be adequate for your situation. However, your insurer may require additional liability protection if business-related visitors come to your home.
In-home business insurance policies provide comprehensive coverage that is tailor-made for businesses that operate out of a residence. They may include the following specific types of coverage.
- Business property insurance reimburses you (up to the policy limits) for the loss or damage of items such as office furniture, computers, copiers, and other equipment used to conduct business. You should request replacement-cost coverage, because the actual value of equipment lost in a fire or other accident could be significantly lower than what it would cost to replace it.
- Liability insurance helps protect you from claims resulting from injuries suffered by business-related visitors on your property (up to the policy limits). This includes delivery people and couriers, not just clients.
- If your business is interrupted because of damage to your home, you may also be reimbursed for lost income and possibly for the expenses required to operate out of a temporary location or to make payroll for a set period of time.
You may want to check with the local authorities or an attorney to verify that it is legal to run your particular business in your home, because if you are not in compliance with all regulations, your coverage could be voided.
Finally, auto insurance policies often exclude accidents or losses that occur while you are conducting business activities. You should also consider business vehicle coverage if you plan to use your automobile for deliveries, client visits, or any other business purpose.