If you are running a “home based” business, you may not have enough insurance or have the proper insurance to protect your business equipment and liability exposure. A typical homeowners insurance policy only provides between $1,000-$2,500 coverage for business equipment, which is usually not enough to cover all of your business property. You may also need coverage for liability and lost income. Insurance companies differ considerably in the types of business operations they cover under various types of policies/riders they offer. Many exclude any type of business risk at home. So it is wise to shop around for coverage options as well as price.
To insure your Home Based or In-Home business properly, you need to explore the following options with your local agent.
Homeowners Insurance Policy Endorsement vs. In-Home Business Policy vs. “BOP” or Business Owners Policy
Homeowners Insurance Policy
You may be able to add an endorsement to your existing homeowners insurance policy to change your standard coverage for business equipment such as computers and other office equipment. Some insurance companies such as Allstate Insurance, separate computers from business contents so you can have up to $20,000 coverage for computers in addition to what you might need for other business equipment. For as little as $10 a year you can raise the policy limits from $2,000 to $20,000 for desks, file cabinets, copier, fax, files, etc.
It is also important to endorse your homeowners insurance policy for business liability. You need liability coverage in case clients or delivery people get hurt on your premises. For example: they may trip and fall on the driveway or sidewalk of your home and sue you for failure to keep them ‘safe.’
In-Home Business Insurance Policy
An in-home business policy provides more comprehensive coverage for business equipment and liability coverage than by endorsing a homeowners insurance policy. These policies can vary significantly depending on the insurer.
In addition to protection for your business property, most of these policies reimburse you for the loss of important papers and records, accounts receivable and off-site business property. Some will pay for the income you lose (business interruption) in the event your home is badly damaged by a fire or other disaster that makes the home uninhabitable for a period of time. (Usually up to 12 months). These policies will also pay for the extra expense of operating out of a temporary location.
In-home business insurance policies generally include a broader definition of liability coverage and have higher limits of liability coverage. For example: they may offer protection against lawsuits for injuries caused by the products or services you offer.
Stand alone in-home business insurance policies are generally not available from your homeowners insurance company, but instead are offered by specialty commercial insurers that offer in-home business policies. In other words, you don’t have to change your homeowners insurance carrier to obtain this commercial coverage.
BOP or Business Owners Policy
These are commercial “package” policies created specifically for small to mid-size businesses. This policy is an excellent solution if your home-based business operates in more than one location. Meaning if you have a “real” office away from your home, you can extend the coverage to your home by endorsement. A BOP, like the in-home business insurance policy, covers business property and equipment, loss of income, extra expense and liability. However, these coverage’s are much better than those in the in-home business policy. The industry term for this is “special” vs. “broad form” coverage. Broad form covers only the named perils while special covers everything unless specifically excluded.
**NOTE: None of the coverage’s mentioned covers workers compensation, health, disability insurance or automobile liability from an accident that might occur when using your car for business or your employee using their car for your business errands. These are additional insurance coverage options that you’ll need to discuss with your local agent.
Homeowners Insurance Tips
Tips to keep your Home Insurance Costs low