Today’s home-based businesses range from home day care centers to high-powered sales offices handling multi-million dollar contracts. Regardless of the scope of your business, if you work at home, you have insurance needs that go beyond your homeowners policy.
Most homeowners policies exclude claims resulting from "business pursuits." This means they will not cover any business-related claims, even if they occur on your property. So if a client slips and falls while visiting you, your policy would not cover the cost of treating her injuries...or the resulting negligence lawsuit. Your policy also will not cover business personal property that gets lost or damaged on your premises. This could leave your computers and other valuable business equipment without coverage. Even if you claim your computers as primarily for personal use, most homeowners policies provide only up to $2,500 in coverage for electronics.
How to Protect Your Home-Based Business
Owners of home-based businesses can protect their livelihood in several ways:
1 Add an endorsement to your homeowners policy: An endorsement adds coverage to an existing policy. A "permitted incidental occupancies" endorsement extends coverage under your homeowners policy to include certain types of businesses and increases the coverage limit on furnishings, supplies and equipment from $2,500 to whatever your homeowners policy’s Coverage C limit is. However, it won’t cover liability claims that occur outside the home. Insurers also offer other endorsements, including coverages for those who run home day care centers and for businesses that gross less than $250,000 per year and meet certain conditions.
Salespeople, professionals and skilled tradesman usually require insurance beyond what’s available in a homeowners policy. Their options include:
2 Buying separate policies for business property, commercial general liability and business income protection, which allows you to tailor coverage to your specific needs.
3 Buying a "package policy." The business owners policy, or BOP, combines property and liability coverages, including automobile liability. Some insurers even offer "entrepreneur"
packages designed specifically for small, home-based business enterprises. Many business owners find these more economical than buying separate policies.
Don’t make these costly mistakes!
Some home-based businesses need coverage that goes beyond the business owner policy.
1 No workers’ compensation coverage: If your business has employees, you need workers’ compensation coverage. Most states make workers’ compensation elective for sole proprietors, partners, employed spouses or certain classes of corporate officers. Classifying employees as independent contractors does not always protect you from claims—independent contractors can file workers’ compensation claims if they meet the definition of an employee. A minimum premium workers’ compensation policy can give you protection and peace of mind.
2 No professional liability or errors and omissions coverage: General liability and business owner policies exclude liability arising out of the "rendering or failure to render professional services." You don’t have to consider yourself a "professional," such as a doctor or lawyer, to need coverage for negligent acts. If you give advice and recommendations, if you create programs or products for your customers or if you provide a service, you need liability protection. Low-risk businesses can buy "errors and omissions" coverage at a reasonable cost.
No matter what type of home-based business you have, we can help you protect it with the right insurance coverage's. Please call our office for more information.