A home-based business is a great way to take charge of your finances, career, and future. However, there are risks involved. For example, your inventory and equipment could be destroyed or you could be sued. Manage these risks by securing insurance for your home-based business.
Home-Based Business Snapshot
Small businesses fuel the U.S. economy – and many of them are home based. According to the U.S. Small Business Administration (SBA), there are more than 33 million small businesses in the U.S. Of these, more than 27 million have no employees, the majority of which are sole proprietorships.
Many small businesses are home based. In fact, the SBA says around 50% of U.S. businesses are home based, including 24% of companies with employees. Newer companies are especially likely to be home based.
These home-based businesses don’t just provide high-quality products and services – they also provide a source of income for millions of people.
Homeowners Insurance Doesn’t Adequately Cover Business Risks
Don’t count on your homeowners insurance to cover your business losses. Homeowners insurance covers personal exposures and it may exclude claims arising from business or commercial activities entirely. Even if some coverage is available, the limits may be insufficient to cover business-related losses.
For example, a standard homeowners insurance policy may provide $2,500 coverage for business equipment. However, if your business has equipment worth significantly more, you’ll need additional coverage.
You may also need additional coverage to protect your business against lawsuits. Small businesses can be sued just like big ones. Unlike big businesses, though, they may not have the capital needed to survive litigation. Insurance provides an important safety net.
Does Your Home Business Have Uncovered Insurance Needs?
The insurance needs of home businesses vary considerably. To identify the unmet insurance needs you may have, ask yourself the following:
- Do you have more than $2,500 in business equipment? Home-based contractors, photographers, and other professionals easily surpass this limit and may need additional coverage.
- Do you maintain inventory? If you keep an inventory of items for sale, you may need additional coverage to protect it.
- Do you use your vehicle for business-related purposes? Since your personal auto insurance policy may not cover commercial use, you may need additional coverage.
- Do you see clients or vendors at your home? Consider what would happen if a client were injured on your property. To protect against this risk, you may need additional coverage.
- Could your products or services lead to bodily injury or property damage? For example, consider what would happen if a customer was hurt while using one of your products. You may need coverage to protect yourself from lawsuits.
- Could your services lead to financial loss for your clients? If so, you could face a lawsuit. Insurance provides protection.
- Do you have employees? You could face lawsuits alleging harassment, discrimination, wrongful termination, and other unlawful employment practices. You could also be held liable for work-related injuries.
Coverage Options for Home-Based Businesses
If you have a home-based business, you may be able to secure some coverage for it by adding endorsements on your current homeowners and auto insurance policies. However, if you need more coverage than this, you’ll need to purchase a separate policy designed to meet the needs of small businesses. Depending on your exposures, you may need additional coverage types, such as workers’ compensation and employment practices liability insurance. An insurance agent can help.