If you run a business from your home, you’re far from alone. There are a growing number of homeowners who run either full-time or part-time businesses from their kitchens, bedrooms, garages, and basements. Many of these entrepreneurs rely on the protections provided by their standard homeowners’ insurance policy to cover their home-based businesses; however, depending on the type of business you operate, this could be risky.
Standard property insurance policies don’t provide personal liability protection and don’t cover the damage you might suffer from cybercrimes. They also won’t protect vehicles that you use for your business or cover business property losses above a certain limit, usually $2,500. If you are running a home-based business, here are a few things to consider when it comes to your insurance.
Home-based business insurance
Home-based business insurance provides additional protection for any business you operate from your home. Think of it as a supplement to your standard homeowners’ insurance policy. Your homeowners’ insurance protects your house’s structure and your personal belongings, but it doesn’t offer specialized protections that you might need when you run a business from your home.
Say a client visits your home office and breaks a leg while tripping over a step. Your homeowners’ insurance policy might not cover any medical bills for which you are held liable. It also might not help to pay your legal costs if this client sues you. A home-based business insurance policy, though, would pay out in such a case.
A home-based business policy will also cover lost income if your business is shut down for a covered reason. If the business equipment in your home is destroyed in a fire, and you can’t operate for three months, your business policy’s business interruption protection will help replace the income you lose during this shutdown period.
Additionally, home-based business policies will cover liability and damage for the vehicles owned by your business or those that you drive as part of operating it. Say you use your personal car to do gig work or travel to and from clients. You might also need business auto insurance coverage under a home-based business policy.
Business personal property coverage
You may also consider business personal property coverage. If the computers, monitors, desks, tools, and inventory that you use to run your home-based business are damaged or destroyed, your home-based business insurance policy will help pay for replacing these items. If this equipment is primarily used for your home business, your standard homeowners’ insurance policy might not cover anywhere near what you’d have to spend to replace it. A standard property insurance policy will typically pay out a maximum of $2,500 in business personal property coverage. Depending on your business, you might need far more coverage to protect the tools, equipment, and electronics you use to run your home business.
Cyber liability insurance
Another key piece of home-based business coverage is ensuring that you have the proper cyber liability insurance. This insurance protects you if your business suffers losses from data breaches, phishing scams, or ransomware attacks. This coverage is essential if your business has its own website, accepts payments, or stores customer data.
Next steps
If you’re ready to invest in home-based business insurance, you may consider coordinating with your insurance broker and other professionals to ensure that you select the policy with the right coverage for your specific situation. If you have questions, our Business Tax and Advisory team is here to help. Contact us to learn more.
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