What you need to know about home-based business insurance
Many factors have come together to create a surge in home-based businesses in recent years. From the forced isolation of the COVID-19 pandemic to improvements in technologies like videoconferencing platforms and online payment systems, it’s easier than ever to operate a business out of your residence. However, there are still plenty of risks to consider, which is why home-based business insurance is essential.
This article provides an overview of home business insurance, explaining what it is, the different coverages, what business insurance for a home-based business costs, and more. If you’re researching home business insurance coverage, it’s a must-read!
Why you can’t rely on your homeowners insurance
It’s a common misconception that if you run a business out of your home, your homeowners insurance policy will cover your operations. However, homeowners insurance is designed to protect your personal belongings and address liabilities from your personal activities.
Most homeowners insurance will cover approximately $2,500 in business-related property in your home. But if you have more than that amount or you take that property with you to another location, your policy probably won’t cover a loss.
Homeowners insurance also might not cover certain types of business claims. For example, if a customer or client gets hurt at your home and sues you, a homeowners policy likely won’t pay the person’s medical expenses or your legal fees.
Similarly, if an incident like a fire forces you out of your home temporarily and you have to pause your business operations, your homeowners policy probably won’t cover business interruption. That means it won’t pay for lost income or costs associated with resuming operations from another location.
What is home-based business insurance?
Home-based business insurance is business insurance for a company operating out of a home rather than a commercial building or other location. There are several types of insurance for home-based businesses. At biBerk, we offer seven essential policies.
General liability insurance covers costs from things like injuries to customers or clients at your home and damage to their property. So, if someone visits to talk about your website development services, slips on your icy front steps, suffers an injury, and sues your business, your general liability policy can protect you. This insurance also covers libel, slander, and copyright infringement. Plus, you can customize your general liability insurance policy with endorsements like cyber insurance, hired and non-owned auto liability, employment-related practices liability, and employee benefits liability.
Errors and omissions (E&O) insurance (also called professional liability insurance) can protect your business if you make a mistake in the professional advice or services you provide a client, and they file a lawsuit, saying your mistake cost them money. For example, if you work out of your home as an accountant, fail to file a form for a client by the deadline, and they have to pay a large penalty, your E&O insurance can pay related costs if they sue you.
A business owners policy (BOP) (also called property & liability insurance) conveniently combines general liability insurance with coverage for the business space within your home and any property you need to run your company. Let’s say someone breaks into your home office and steals your computer, tablet, and other devices you use in your consulting business. Your BOP can pay to replace them. The policy also covers business interruption, including lost income and costs to continue or resume operations following a covered loss. Like with a general liability policy, you can tailor your BOP with add-ons, including cyber insurance, hired and non-owned auto liability, employment-related practices liability, and employee benefits liability.
Workers' compensation insurance is typically mandatory for any business with employees, even small home businesses. So, if you make home decor products that you sell online and have an employee who helps you with fulfilling orders, they need to be covered by workers’ comp. It can pay for their medical expenses and lost wages if they get hurt on the job. You should contact the authorities in your state if you have questions about your coverage obligations.
You can purchase cyber insurance as an add-on to a biBerk BOP, general liability, or professional liability policy. It can pay for costs related to computer hacks or data security breaches where someone steals sensitive information and uses it to commit fraud or is likely to. So, if you do online tutoring and have credit card numbers and other information from your students and data gets stolen by hackers, your cyber insurance can help pay the related costs.
Commercial auto insurance protects you if you’re at fault in an auto accident in a business-owned or leased vehicle. For example, if you’re driving your delivery van, run a stop sign, and cause an accident that damages another drivers’ vehicle, your commercial auto insurance can pay the costs if they sue you. It can also pay to repair your vehicle.
Umbrella insurance provides an added layer of protection on top of an existing biBerk liability policy. Imagine that you have a $500,000 limit on your general liability policy but are found liable for $600,000 in damages over a client’s injury. Your umbrella policy can cover the difference (up to its own limit).
Will you need all of these home business insurance coverages? Not necessarily. For example, if you don’t provide professional advice or services, errors & omissions insurance isn’t necessary. And you might be confident that you’ve got high enough coverage limits on your policies that you don’t need umbrella insurance.
Here are some questions to consider as you assess your insurance needs:
What type of business do you operate?
The nature of your business will affect the types of risks you face. For example, a home-based bakery has different potential liabilities than a business consultant.
What is the value of your business equipment and inventory?
It’s important to assess the cost of replacing essential business assets.
Do clients or customers visit your home?
Regular client visits increase your liability exposure.
Do you have employees?
If so, workers' compensation insurance is probably required.
Do you handle sensitive customer data?
If you do, it’s important to have cyber insurance.
Do you have business vehicles?
Commercial auto insurance is essential if you do.
What are the potential financial consequences of a lawsuit or a significant loss?
This will help you determine appropriate coverage limits.
These questions are good food for thought. If you want to discuss which policies are essential for a business like yours, our licensed insurance experts are happy to have that conversation.
What does home-based business insurance cost?
Multiple factors affect the cost of home business insurance. They include the type of coverage, the size of your business, your claims history, and others.
But you can determine what you’ll pay by getting free, instant online quotes for the policies you need. And thanks to biBerk’s direct-to-you business model, our policies can be up to 20% less than those from other providers.
Insurance for your business at home: easier to get than you might think
As important as business insurance is for home-based businesses, nobody looks forward to shopping for and purchasing it. The good news is that the process is fast and efficient when you buy your policies from biBerk.
As noted above, you can get quotes from our website whenever you have a few spare minutes. You can also make your purchases there and download a Certificate of Insurance (COI). Coverage is active as early as the next day.
Mission accomplished! Now you can turn your attention back to running your successful company, confident that your home business insurance can address unexpected expenses.