It may surprise you to know… about half of U.S. businesses are home-based.1 If you run a business out of your home, your homeowners policy may not provide the coverage you need to protect your business assets and income.
With standard homeowners insurance, the coverage for business equipment such as computers is often limited to $2,500, and business liability is typically excluded altogether. Fortunately, there are some options designed to help protect your business and your income.
If your business activities are limited, a basic rider or endorsement expands the policy limits for business property losses can sometimes be added to your existing homeowners policy and might be adequate for your situation. However, your insurer may require additional liability protection if business-related visitors come to your home. You may be able to obtain a business liability rider for an additional cost.
Broader In-Home Protection
In-home business insurance policies provide comprehensive coverage specifically designed for businesses operating out of a residence. They may include the following types of coverage:
- Business property insurance reimburses you (up to the policy limits) for the loss or damage of items such as office furniture, computers, copiers, and other equipment used to conduct business. You should request replacement-cost coverage – because the actual value of equipment lost in a fire or other incident could be significantly lower than what it would cost to replace it.
- Liability insurance helps protect you from claims resulting from injuries suffered by business-related visitors on your property (up to the policy limits). This includes delivery people and couriers, not just clients.
- If your business is interrupted because of damage to your home, you may also be reimbursed for lost income and possibly for the expenses required to operate out of a temporary location or to make payroll for a set period of time.
Even Broader Protection with a BOP
If your home-based business operates in other locations, you may want to consider a business owners policy (BOP), which is designed specifically for small- and mid-sized businesses. A BOP offers similar but much broader coverage than an in-home business policy. If you have employees, however, you’ll need separate policies to provide worker’s compensation, health insurance or disability insurance.
No matter what type of coverage you choose, you may want to check with your local government or an attorney to verify it’s legal to run your particular business in your home. If you’re not in compliance with all regulations, your coverage could be voided.
Also, be aware auto insurance policies often exclude accidents or losses, which occur while you’re conducting business activities. You should consider business vehicle coverage if you plan to use your automobile for deliveries, client visits, or any other business purpose.
1U.S. Small Business Administration, 2019
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