Do I Really Need Insurance for My Home-Based Business?

Did you know that more than 90% of home business owners have not purchased Home-Based Business Insurance? It's because most home-based business owners believe that their business is protected under their home owner's insurance policy. This is what we call an insurance myth. While some home owner's insurance providers offer additional coverage for home-based businesses, this coverage is limited, making it increasingly important for home-based business owners to wake up and smell the policy.

What is Home-Based Business Insurance? — Home-Based Business Insurance covers anything in your home that may suffer damage as a result of fire, flooding or break-ins that is related to the operation and profitability of your business. This includes your printers, computers, cameras, tools, equipment, etc. that are used for business purposes.
Why Doesn't My Home Owner's Insurance Policy Cover My Home-Based Business? — While your business may be located in your home, it cannot be covered under the same provisions as your personal assets for two main reasons:

Home Owner's Insurance is designed to offer protection against damage and loss for a private residence, not a commercial business. Home Owner's Insurance cannot offer wage-assistance for lost time or inability to operate due to excessive damage and it cannot cover personal liability claims made in business transactions.

Having no business insurance raises your personal liability. If you become engaged in a lawsuit over business matters and have no business insurance to help cover the costs and possible liability in those proceedings, the party suing you can go after your personal assets. As a general rule of thumb, and just for the sake of good business practice, keep your personal and business assets separate.

What Types of Coverage Are Available? — There are four main types of coverage available to home-based business owners, including the endorsement options for the basic home owner's insurance policy. These coverages are:

Increased Limits on Business Property—An Increased Limits on Business Property endorsement will allow you to increase your home owner’s insurance by up to $10,000, usually in increments of $2500. This allows you some, although limited, coverage for your home business.
Business Pursuits — A Business Pursuits endorsement on your homeowner’s insurance policy will protect you if you do not own a home-based business but sometimes do work from home.
In-Home Business Policy — An In-home business policy is less expensive than a business insurance policy, yet offers much of the same protection and can be added as an endorsement onto your home owner’s insurance policy.
Business Insurance — Business Insurance covers you for all the same incidents as homeowner’s insurance but with a wider range of coverage for commercial business. Business insurance will cover any losses you suffer in profits and equipment due to fire, flood, break-ins, etc.

Remember, although a homeowner’s insurance policy can provide some protection for the home-based business, it cannot adequately meet the needs of a business when a claim must be filed.