“When asked about the lack of insurance, nearly 40% of home-based business owners say they thought they were protected by some other type of coverage, while almost 30% say their businesses are too small to insure,” the IIABA said. “Notably, nearly 20% could not give a reason for not having insurance.”
Homeowners insurance covers incidents such as loss or theft of personal property. But if a delivery person slips and falls on your property or your business equipment is destroyed in a fire, homeowners insurance won’t protect you. Without coverage specifically designed for your home business, you put your livelihood, and possibly that of your employees, at risk. That’s why home-based business insurance is a good idea.
Choosing the right policy
No matter how small your home-based business, make sure you’re protected with the right coverage. There are three main property and liability options for home-based business insurance:
- Homeowners policy endorsements: Adding an endorsement, also known as a rider, to your existing homeowners policy is often the simplest and most affordable way to insure smaller home businesses that don’t manufacture products on the premises or use a lot of equipment. Endorsements are also a good fit for solo entrepreneurs with few business-related visitors.
- In-home business policy: Combining home and business insurance into a single plan, this type of policy offers more specific types of coverage. This policy is a step up from a basic homeowners policy endorsement, offering a greater range of coverage for a growing business. If your in-home business has developed into a mid-level operation with more visitors, equipment and output, this may be the policy for you. Such a policy may include more extensive property and liability coverage than endorsements, as well as business interruption coverage, which protects your income in the event your business is disrupted because of a disaster.
Examples of what kinds of businesses would use this policy include a small baking operation that meets with clients in person and also does all baking, orders and shipping in-house; a clothing designer who fits clients, as well as manufactures and ships goods, from home or an accountant who makes regular in-person appointments and uses certain rooms in the house as dedicated office space.
- Business owners policy: Often referred to as a BOP, this type of policy is the most comprehensive form of coverage for small business owners. It offers protection for claims brought by contractors and customers in addition to protection for business property and business interruption. Not all home-based businesses qualify for a business owners policy.
Whichever policy you consider best for the size and type of your business, be aware that you may need additional coverage not included in a standard plan. Here are some additional coverage options you may want to discuss with your insurance agent, if the plan you’re considering doesn’t include them:
- Data compromise coverage: Helps protect you and your business from legal action stemming from a security breach that compromises confidential customer or client information.
- Employment practices coverage: Protects against claims brought against you and your business by your employees.
- Key person insurance: Basically life insurance on a person critical to the success of a business such as the owner, founder or a key employee, without whom the company might fail.
Most states require home-based businesses to purchase workers’ compensation insurance for employees, but purchasing this coverage is a smart move even if not mandated by law.
Know your home’s worth
In addition to finding the right home-based business insurance, it’s important to take into account the value of your home ahead of time. Have you made upgrades to your home, added and disaster-proofing improvements, or received any major gifts? Whether you’re in a house, a rental home or a condo, talk to your Nationwide agent about the property insurance coverage that’s right for you.
As you can see, in-home business insurance isn’t a one-size-fits-all consideration. Talk to a Nationwide agent about the best coverage for your home-based business.