Insuring Your Home Business
If you operate a business from your home, it's important that you obtain
adequate insurance coverage for your business equipment and transactions, just
as if you had a separate office. Even a small home enterprise needs full
protection against the risks of doing business.
Homeowners' or Renters' Insurance Policies
Do not rely exclusively on your regular homeowners' or renters' policy to
protect your home business, at least without checking first with the insurance
company. Many of these policies do not cover business use of a home, which
means that you probably won't be protected against losses relating to your
business. For example:
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After your computer is stolen, you may find out that it's not covered by your
homeowner's policy because business property is excluded.
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After your house burns down, you may find that your fire coverage is void
because you didn't tell the insurance company that you were using your home for
business.
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After a delivery person slips on your front porch and breaks his back, you may
find that you're not covered for injuries associated with business deliveries.
It's easy to avoid these nasty surprises. Sit down with your insurance agent
and fully disclose your planned business operations. It's relatively
inexpensive to add riders to your homeowner's policy to cover normal business
risks.
Replacement Cost
When you talk to your insurance agent and/or review policy provisions, make
sure that the policy will pay you the full replacement cost for your business
equipment and furnishings -- not the (much lower) value of your used office
property.
Figure out how much it would cost to replace your business property after a
fire, theft, or other disaster. Don't overlook things such as the specialized
business software you run on your computer. Depending on the nature of your
home business, replacing equipment and furniture could run into the many
thousands of dollars.
Ask your insurance agent what it will cost to insure this valuable property,
allowing for a good-sized deductible to keep costs down.
Liability Insurance
Your homeowners' or renters' insurance may not adequately protect you from
liability to business visitors. Accidents -- such as people getting hurt when
they trip and fall -- are more likely to happen at home than in a well-planned
office building. Your homeowners' policy probably protects you if you're sued
by a social guest or someone at your home for a nonbusiness purpose -- a
florist's truck driver delivering flowers or the meter reader who's checking on
gas usage.
Most homeowners' policies, however, do not cover injuries to a business
associate, employee, customer, or delivery person who is hurt on your property.
To cover these risks, you may need a rider to your homeowners' policy or a
commercial general liability policy.
Also, think about the extent of your general liability coverage, should you
accidentally injure someone or damage their property while away from home on
business. You may need a rider or special policy to cover this risk.
Certain types of businesses, home-based or not, need special kinds of
insurance. If you render professional services, look into professional
liability insurance. If you manufacture, distribute, or sell products that may
hurt someone, you might consider products liability insurance. And if you have
employees, you'll need to provide workers' compensation coverage.
Automobile Insurance
Of course, you'll need automobile liability insurance for cars or trucks that
you use only for business. But if you do business in your personal vehicle,
make sure that your car insurance covers injuries that occur while you're on
business errands. You may have to switch companies to find insurance that will
cover business-related driving.
If you have employees who use their own cars for work errands or deliveries,
you'll want to consider getting special insurance (called employers' non-owned
automobile liability insurance).
Policies for Both Home and Business
Several insurance companies have developed special policies that cover both
your home and a business run from your home. Typically, these policies cover
your computer equipment and other business property -- whether used in your
house or elsewhere -- and protect you from business liability lawsuits and loss
of income.
These home/business policies can be less expensive than either adding riders to
your home insurance or buying separate policies for home and business. But
check the coverage carefully, as these policies tend to primarily address home
offices and may not adequately insure you if, for example, you're a small
manufacturer or a wholesaler who stores inventory in your home.