Home Based Business Insurance Guide

The digital workforce of today has changed not only the way employees do their work, but also where they do it. Instead of commuting to the office every day, successful entrepreneurs and small business owners can run their operations from the comfort of their own homes.

But just because you can run your business in fuzzy slippers doesn't mean you can be casual about your insurance. A home-based business, like any other brick-and-mortar operation, must be safeguarded. More importantly, it is not a question of whether or not to obtain insurance, but of what type of insurance to obtain.

If you're one of the growing number of home-based entrepreneurs, you've probably got insurance questions—and we've got answers. Continue reading to learn why you need it and which type of home-based business insurance is best for you.

What Is Home Business Insurance?

Home business insurance is not a type of insurance in and of itself. Instead, it's a collection of policies that most home-based businesses require.

Insurance is essential for home-based businesses because, despite operating on a smaller scale, they face many of the same risks as their larger counterparts. Third-party claims, damage to company-owned property, and vehicle accidents are examples of this. And, while homeowner's or renter's insurance protects your home, it usually does not cover business liabilities or protect your business property, such as technology, files, or professional equipment. This is due to the fact that most homeowners policies include business-related exclusions and limitations. Many policies, for example, exclude structures that are not attached to a dwelling (such as a detached garage or shop building) if they are used for commercial purposes. Without the proper coverage, your company may be obligated to pay out of pocket for:

Property damage: If your inventory, equipment, furniture, or files are destroyed in a fire, this type of coverage can help pay for replacement costs.
Lawsuits: If your company is sued, you will not be obligated to pay for costly defense costs.
Injuries: If a client or employee trips and falls in your home, you will not be responsible for any medical or legal bills.
Data loss issues: You will be protected if your data is stolen or damaged.

Home-based business insurance is coverage that is tailored to your specific needs, protecting you from third-party liability, property damage, and other claims.

Do I Need Insurance for a Home Based Business

Given the number of potential liabilities that any business faces, it's a good idea to have at least a few policies in place, depending on your company's needs. And it may be one less thing to keep you awake at night, even if it is in your home office. Do you still need convincing? Here are some questions to think about:

Do you have customers or clients who come to your house?
Do I keep inventory, products, or supplies at home or at a job site away from home?
Would damage to your home cause a disruption in your business?
Do you have employees who work in or around my house?
Do you keep client or employee information on my computer?

If you answered "yes" to any of the above questions, you should review your type of coverage and coverage limits. In this case, home liability insurance may not be sufficient to protect your home-based business.

Types of Home-Based Business Insurance

A home-based business can be anything from a small consulting firm to a large retail operation. As a result, the type of coverage you require for your home-based business will be determined by the size of your company. It will also be determined by your industry. Here are your coverage options if you need flexible insurance to protect your home-based business:

Business Automobile Coverage: Do you use a vehicle for business purposes? You need business auto insurance to cover the vehicles you use whether you're providing services, visiting clients, or making and picking up deliveries. Because your personal auto policy will not cover business use of the vehicle, you will need business automobile coverage if you are in an accident.
General liability insurance: The most common type of coverage for a home business, liability insurance pays for third-party injuries and damages for which you are liable. If you plan on having clients or visitors to your home, liability insurance is a must to protect your business. After all, your homeowners' insurance will not cover injury claims made by visitors to your home-based business. So, if a potential client slips and falls on the way out of a meeting in your home, you'll need liability insurance rather than homeowners insurance to be covered.
Professional liability insurance, also known as errors and omissions (E&O) insurance, provides the following coverage: If a client or customer believes that a mistake in your professional services resulted in a financial loss, they have the right to sue your company. Even if you didn't do anything wrong, if you don't have business insurance, you'll have to pay for expensive legal defense costs out of pocket. Professional liability insurance, on the other hand, protects you against claims of negligence or failure to deliver made by your clients or patients, including misrepresentation and inaccurate advice.
Product Liability Insurance: Does your company manufacture or sell a product? If this is the case, you should inquire with your provider about product liability insurance. This type of coverage protects your company from property or person damage caused by a product you designed, manufactured, or supplied.
Business Property Insurance: You most likely rely on equipment to run your business from home, such as a computer, fax machine, printer, furniture, and so on. However, even if those items are in your home, they aren't usually covered by your homeowners' insurance in the event of a fire or flood. If you can't afford replacements, property insurance may be required to keep your business running in the event of a disaster.

How Much Does At-Home Businesses Insurance Cost?

A variety of factors will be considered by an insurer when determining the cost of your premium. This includes information such as the type of business you own and how long you've been in operation, as well as your credit history and where you live. A home-based catering company bakery, for example, will most likely pay a different rate than a graphic designer who works from home alone.

A home business insurance policy, on the other hand, can range from $250 to $1,500 per year, depending on your needs. A business owner's policy (BOP) is the most cost-effective solution for covering both business assets and liability for the majority of home-based business owners. BOPs are all-inclusive policies that typically start around $250 per year and protect business owners from general liability incidents, property losses, and business interruption claims. An insurance agent can assist you in determining which option is best for your specific business needs.