Insurance Options for Home-Based Businesses

If you’re operating a small business out of your home, you’re not alone. According to Small Business Administration (SBA) data, 52% of all U.S. small businesses are home-based. Chances are you’re also one of the 75% of all U.S. businesses that are classified as non-employer, meaning you have no employees, no payroll and, in all likelihood, no vacations or paid sick leave. So have you given any thought to what would happen if a fire or some other disaster closed you down? Or how you would pay for damages if a client or delivery guy was injured on your property? Do you have the small business insurance that can protect your home-based business from loss of income and liability? Here are some small-business insurance options to consider.

Business Owners Policies – A Package Deal

If you have a Business Owners Policy, you’re covered for a number of unpleasant eventualities. Also called BOPs, these are package policies created specifically for small-to-mid-size businesses. A typical BOP includes property insurance, liability insurance and business interruption insurance, usually at a bundled cost that is less than what each coverage would cost if purchased separately.

Homeowners Policy Endorsements

However, if you’re operating out of your spare bedroom, a BOP may seem like overkill. Isn’t your renters insurance or homeowners insurance enough? Probably not. Typically a homeowners or renters policy will only cover $2,500 for business equipment. That’s hardly enough to replace your computer, printer, desk and chair, let alone cover the cost of lost files, lost income and temporary expenses. A better option is a Homeowners Policy Endorsement.

This is a simple addition to your standard coverage that raises the limits on your business equipment. Some insurance companies will let you increase up to $10,000 in coverage in increments of $2,500.

If you have clients visit your home office or have business-related deliveries to your home, look into a homeowner’s liability endorsement. This can protect you from liability for injuries on your premises. Many insurers limit this coverage to people who have very few business-related visitors, however some companies will make exceptions.

In-Home Business Policies/Endorsements

These policies can provide more comprehensive coverage than endorsements to your standard homeowner or renter policy. They may also include reimbursement for loss of records, accounts receivables, lost income and the extra expense of having to work from a temporary location.

Business Interruption Insurance

This coverage is not sold separately; it is typically added to a property insurance policy or included in a package such as a BOP. It compensates you for lost income if some type of disaster forces you to work from a temporary location. It typically covers any lost profits you might have earned if the disaster hadn’t happened (based on your financial records). It also covers operating expenses like electricity.

Extra Expense Insurance

This coverage will reimburse you for expenses incurred above and beyond your normal operating costs while your regular place of business is repaired.

You can learn more about the coverage options available and compare quotes for in-home business insurance policies here.