Your homeowners or renters policy is not designed to protect your home-based business. In general, homeowners policies provide limited coverage (typically around $2,500) for business equipment, which may be inadequate for most high-end personal computers and printers. In addition, liability coverage is unlikely if someone is injured on your property during business hours. Also, income losses due to business interruption do not come under the purview of a homeowners policy.
There are three basic ways you can ensure adequate coverage for your home-based business:
- Obtain endorsements, or added coverage to your existing homeowners or renters policy.
- Buy an in-home business policy that specializes in business conducted from home.
- Buy a business owners policy (BOP).
Homeowners Policy Endorsements. Depending on the type of business you run, you may be able to increase your homeowners policy limits for business equipment and general liability for a relatively small, additional premium. For example, if a courier slips on your icy, front walk, a liability endorsement may protect you from responsibility for pay damages if legal action were taken against you. The type of business you operate may affect your insurability for liability protection using an endorsement.
While most homeowners policies protect against severe weather, not all types of damage are necessarily covered. Damage from wind, lightning, hail, and snow are generally included in the average homeowners policy, but bear in mind, however, that most homeowners policies exclude flood coverage. If you are located in a flood zone, you may need to get a separate flood insurance policy.
In-Home Business Policies. For more comprehensive coverage, consider an in-home business policy. You can select higher limits for business property, as well as business interruption coverage that will provide for lost income and ongoing expenses if you are unable to operate your business because of damages to your home. This is in addition to several other business related coverage features that are typically not available in a homeowners policy. For example, coverage may protect against the loss of important documents and records, accounts receivable, and off-site business property or equipment. Furthermore, the liability concerns for a home-based business owner are broader than the scope of a typical homeowners policy. An in-home business policy generally offers liability coverage for accidents that occur on the premises, as for as well as legal action taken against you as a result for you business services or products.
Business Owners Policies (BOPs). Lastly, for business owners with more involved operations, including manufacturing and other operations outside the workplace, a BOP might be a better fit. BOPs generally include: coverage for a building and its contents, business interruption coverage in the event a catastrophe, such as fire, forces operations to cease, and liability protection.
Typically, a BOP covers business property that exposed to risks such as fire, smoke, hail, wind, theft, vandalism, and some forms of water damage (for instance, from leaking roofs or broken pipes). Insurable property includes, but is not limited to buildings, office furniture and equipment, machinery, inventory, and signs.
While you can increase your homeowners coverage to meet some of your business needs, insurance solely for your business does not replace coverage for your home. Assess all your needs to determine the best course of action.