Of the estimated 21 million people who work from home, about 14 million of them don’t have adequate business insurance. According to a survey conducted by the Independent Insurance Agents of America, that because almost 40% of them are under the impression their home business is covered by the homeowner insurance. That could be a costly mistake.
The average homeowners insurance policy typically only covers up to $2,500 for damages that occur on the premises of a home-run business, and only a tenth of that for damages off premises. And it usually will not protect you from liability issues related to your home business. For instance, if a client is injured in your home office or the UPS guy falls on your front porch delivering a business-related parcel. So what are your options for business insurance for your home-run business?
You can get an endorsement on you homeowners insurance policy. But while the average homeowners insurance policy endorsement can be applied to a sole-proprietorship, it may not extend to an incorporated business. It may not cover off-premises liabilities, either, or provide adequate coverage for losses or damages to business property away from home. Endorsements may also cap the amount of annual revenue you can earn to qualify for the policy.
Many insurance companies offer business insurance policies specifically for home-run businesses. These in-home business insurance policies may cost a bit more than an endorsement, but you’ll have higher limits on coverage for your business property and general liability is usually included, or can be purchased for a small additional fee. Depending on your home business insurance policy provider, you may even be covered if damages to your home cause loss of income. Also depending on the business insurance company, your home business may or may not be eligible home business insurance coverage. Some business insurance policies will only cover office-type operations and small retail operations. If you’re operating a home business that doesn’t qualify for in-home business insurance you can still get a commercial insurance policy, but it will cost considerably more. You’ll probably do better cost-wise by shopping around for an insurer who will sell you a home business insurance policy.
A third option available in many states is a Business Owners Package Policy or BOP. BOPs are designed for small and mid-sized businesses and may be a good solution if you run your home-based business from more than one site or make products away from your office — for example, if you sell pies that are made at an off-site commissary. The BOP covers business property and equipment, loss of income, additional expenses and liability, but on a broader scale than your typical in-home business insurance policy.