Do you run a business in your home? Are you planning on starting a home business?
When you run a business from your home, it’s easy to assume that your home insurance will cover your home-based business activities.
However, your home insurance only covers your home.
While a home insurance policy may cover a small amount of equipment necessary for your business chances are it won’t be enough to cover and replace everything.
Likewise, it won’t protect you if clients or other third parties related to your business are injured on your property.
Before you start a home-based business, it’s important to understand exactly how home business coverage can protect you and how to ensure you have the right insurance.
How the Right Insurance Policy Can Protect Your Home Business
When you are investing not only money but also time into building your home business, it’s important to make sure that your efforts are properly protected.
Here are three ways in which the right business insurance policy can protect your home business:
1. Liability Protection
Your house insurance policy likely won’t cover you for injuries or accidents related to your home business. If there is a resulting lawsuit, you won’t be covered.
For example, you may run a salon service out of your home. If a client trips down the stairs and hurts themselves, you are liable for their injuries.
Business liability insurance, however, will cover you in the incidences and pay for medical and legal costs.
2. Equipment and Property
Laptops, desktops, phones, and furniture are all home office basics, and acquiring them can really add up – not to mention if you have additional equipment required for manufacturing products or providing a service.
You need to have separate coverage for your business property – your home insurance policy will likely not cover enough to have these items replaced (if the policy covers anything at all).
This also applies to any coverage required to replace inventory and equipment you’re storing in your home if your business involves making selling products.
3. Loss of Income Protection
Because your business is based in your home, fire or other major disasters can mean losses that can take weeks or months to recover. This means time and income lost from your business.
There is a policy you can apply to your business known as business interruption insurance. This can help keep you financially stable as you repair your home and prepare to continue your business.
This policy differs from loss of use coverage included in your home policy, which covers additional expenses related to a disaster including staying at a hotel.
Types of Home Business Insurance
Now that you know how the right insurance can protect your home business, let’s look at the specific types of home business insurance:
Liability Insurance
Liability insurance, as we mentioned before, protects you and your business if you have customers or clients come to your home. This includes children if you have an at-home daycare or any employees that work in your home.
The potential is always there for someone to get hurt, which is why you need liability insurance. This insurance will cover most damages awarded against you as well as legal costs should you need to defend yourself in a lawsuit.
The personal liability coverage included in your home insurance does not cover these types of situations.
Product Liability Insurance
If your home business sells products, you should have product liability insurance. This type of insurance protects you if the products you sell do not perform, cause bodily harm or result in property damage.
Without product liability coverage, your business may have to pay out of pocket for claims related to product defects.
Operations Coverage
Some home businesses provide a service outside of the office and at a customer’s site. Operations coverage will protect you from any injury or damage caused while providing a service on a client’s property.
Errors and Omissions
Any business that sells a service or advises customers can be sued for failing to fulfill professional obligations.
Errors and omissions coverage, also known as professional liability insurance, will protect your home business against any claims that arise from negligent acts or failure to deliver an expected service or advice.
If a customer makes a claim against your business that you did not deliver what was promised, or that your service caused detriment to their life, errors and omissions insurance would cover the cost of your defense.
Business Auto Insurance
Even if your business is home-based, your vehicle needs to be insured for business use if you use it for business purposes. This covers any products, equipment, or supplies you transport in your vehicle should they be stolen or damaged.
Your regular auto insurance policy will not cover these items so you will need to add an endorsement to your policy to make sure your equipment is covered.
Business Interruption Insurance
We talked about this type of insurance as well but it’s an important consideration when making sure your home business has the right insurance.
If your business cannot operate due to a fire, flood, or burglary, you want to ensure that you and your business will survive financially until you can continue to operate your business.
Business interruption insurance will cover lost revenue until you get back on your feet.
Protect Your Home Business
If you have started a home business, it’s important to let your insurer know to make sure you are fully protected. Otherwise, claims can be denied and policies canceled if you are operating a home business without the proper coverage.
If you haven’t started your home business yet, speak to an expert insurance broker before you. Our team at Capital Insurance can help you figure out exactly what kind of insurance coverage you need to fully protect your business.
Let our insurance brokers tailor the perfect insurance policy for your home business.
