Running a home-based business can be a lot of work, but it can also benefit your finances and lifestyle. A critical part of running a successful business is purchasing the right insurance that protects you and your venture from potential risks.
In many cases, a basic homeowners insurance policy doesn’t cover business activities or assets in your home. However, you can purchase insurance endorsements or riders that extend coverage for your business needs.
Here’s a closer look at what home insurance covers and doesn’t, so you know if you should purchase additional coverage for your home-based business.
What’s not covered by homeowners insurance
Most standard home insurance policies don’t cover:
- Business property worth more than $2,500.
- Computer data loss.
- Business records.
- Injuries or medical bills for employees or customers who get injured on your property.
- Loss of income after damage from a covered event, such as fire, lightning, floods, windstorm, or theft.
It’s critical to read your homeowners policy or speak to your insurer to understand what coverage gaps you need to fill in for your home-based business.
Home insurance options for additional business coverage
If you need additional coverage for your home-based business, consider these options.
1. Home business endorsement
Adding a home business endorsement to your existing homeowner’s policy is an add-on that increases coverage for your business-related property. It could increase your annual premium from $2,500 to $10,000 or more.
2. Commercial liability
Some insurers offer a liability endorsement that protects you if someone gets injured on your property, such as customers or employees. Anytime you have visitors inside your home for a business purpose, you need additional liability coverage.
A downside of a business endorsement is that your insurer may not cover you if many employees or customers visit your home. In that case, you’ll need to purchase commercial property insurance.
3. Business owner’s policy
A business owner’s policy (BOP) is a bundle of policies designed for small and mid-sized businesses. It typically includes broad coverage for liability, property damage, and income interruption (if you can’t conduct business from your home after a covered disaster).
Most major insurance companies have BOPs. So, if you already have auto insurance with Progressive, ask about their business insurance options. In most cases, you can personalize coverage for various risks that apply to your work, such as damaged inventory, cybercrime, and equipment breakdowns.
Insurance shopping tips
The types and amounts of insurance you need for a home-based business depend on various factors. For instance, your homeowner’s policy may be sufficient if you can work from anywhere and don’t have employees, in-person customers, or expensive business equipment.
However, if a home disaster, such as a fire or theft, would leave you unable to operate your business, having interruption coverage would allow you to recoup lost income. And if you have a lot of business equipment, inventory, or foot traffic, you likely need much more liability and property coverage than a typical home insurance policy.
Be sure to ask your insurer if you qualify for discounts, such as being a homeowner or bundling insurance policies. Every carrier offers different types and amounts of discounts, so being proactive can pay off with lower premiums.
Here are some questions to consider for making sure your coverage reduces business risk and gives you peace of mind:
- Do you intend to hire employees?
- Do you have customers, clients, or employees who visit your home?
- Would you be able to operate your business if your home was temporarily unavailable?
- Do you store equipment or business vehicles at your home?
- What’s the likelihood of getting involved in a lawsuit?
If you’re unsure what insurance you need for your home-based business or how to save money on coverages, be sure to get advice from a licensed insurance professional. They can help anticipate potential risks for work and industry, so you avoid financial losses.
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