Home-Based Business Insurance – The United States has over a million small businesses, with about half operating as home-based ventures.
These range from artists, cleaning services, and freelance writers to translators, caterers, dog walkers, personal trainers, and tutors.
However, while running a home business offers flexibility and convenience, it also comes with risks, making home-based business insurance essential.
Home-based business insurance covers property damage, employee injuries, business-related injuries, and potential lawsuits.
Although some home-based business owners rely on homeowners insurance, these policies often don’t provide adequate coverage for business-related risks.
What Type Of Home-Based Businesses Need Insurance?
While there are several types of home-based businesses, some business owners think it is unnecessary to get an insurance policy.
The following are a list of businesses that may need home-based business insurance:
- Web design businesses.
- Online goods sales businesses.
- Tax preparers and accountants.
- Food sales and catering businesses.
Home-Based Business Insurance Coverage
If you have a home-based business, the best way to get coverage is a business owner’s policy.
This policy is a combination of three important types of coverage, which are commercial property insurance, general liability insurance, and business interruption insurance.
Business owner insurance is cheaper to buy compared to purchasing these policies separately. The following are some home-based business insurance coverages:
General Liability Insurance
This insurance covers property damage and accidental injuries from your business operations to others. It covers legal fees, judgments, and settlements in case you are sued for an accident.
General liability insurance covers other types of problems like claims of copyright infringement, advertising injury, and reputational harm.
Workers Compensation Insurance
This insurance is mandatory in every state for all employers to have. It covers your employees’ medical expenses if they get injured or ill due to work occurrences. Employers are generally excluded from this coverage, while some employers do not purchase this insurance. However, it is important to check with your state to understand the state’s workers compensation laws.
Commercial Property Insurance
Commercial property insurance offers coverage over your business property if stolen, damaged, or lost by events like fire. This insurance is also called business property insurance.
Business Interruption Insurance
If your business is forced to be closed due to an event like a fire covered by your policy, this insurance covers costs like payroll, lost income, and relocation if you have to move temporarily to a new location. This insurance is often referred to as business income insurance.
Professional Liability Insurance
For mistakes made while running your business, this insurance covers claims. For instance, if a client claims you offered bad advice as an accountant, professional liability insurance covers legal fees, judgments, and settlements.
Commercial Auto Insurance
If you require a car for business purposes like meeting with clients or delivering goods, commercial auto insurance is what your business needs.
If you use your personal car for work-related activities, your policy will not cover work-related accidents and damages to your car.
How To Purchase Home-Based Business Insurance
This insurance can be purchased as an endorsement to your home insurance policy to add extra coverage for small operations.
While this makes purchasing insurance cheaper, larger businesses or professionals who need specialized coverage may need to purchase this insurance as a standalone policy.
The following best explains how to purchase home-based business insurance:
As An Endorsement To Your Homeowners Insurance Policy
Homeowners insurance companies offer several endorsements, also known as additional coverage, that can be added to a homeowners policy to offer more business-related coverage.
Standard home-based endorsements can double your standard insurance policy limits for business property from $2,500 to $5,000 for less than $20 a year.
This makes it good for small businesses with annual sales up to $5,000 or less.
As A Standalone Business Insurance Policy
A standalone business insurance policy offers more range of coverage and higher coverage limits. This policy can offer better coverage for business equipment and liability than a homeowners insurance policy endorsement.
Standalone business insurance policies are best for businesses that have visitors coming and going. They are also best for businesses that have a lot of business property to insure.
How Much Does Home-Based Business Insurance Cost?
On average, business owner insurance costs $57 monthly, according to Insureon. While this is so, how much this insurance costs varies based on several factors. Insurance companies use the following factors to determine how much this insurance costs:
- Business type.
- Number of employees.
- Business location.
- Coverage type.
- Business property and equipment.
- Deductibles and coverage limits.
Using these factors, they can determine how many risks your business poses and how much premium you would be charged to cover them.
Do I Need Home-Based Business Insurance?
Whether you run a small or large home-based business, you cannot depend on your homeowners’ insurance alone.
Before opting for this insurance, consider the type of business you run, the risks your business may face, and your number of employees.
Whether or not you visit clients to carry out a business, if your business needs a vehicle, and whether your business holds personal financial information about your clients.
Using these questions, you can determine whether you need home-based business insurance.
