Getting a home business off the ground entails many of the same concerns and considerations as any other startup, including the purchase of proper insurance. Unfortunately, many business owners are under the false impression that a home business doesn’t entail the same risk associated with other settings. Few things could be further from the truth.
What’s in a Name?
One of the biggest mistakes made by new, home-based business owners is failing to buy a policy naming their business as the owner of record. Remember, even if you are a sole proprietor, it is important to distinguish between you and your home-based business. Set aside a special area, use the same name and implement other standard operating procedures designed to differentiate business from personal use of the home, equipment and other assets.
Home Is Where the Hazards Are
Working from home often entails many unique hazards. Home-based business owners routinely tackle everything from the plumbing to computer-related repairs on their own. Disability insurance may be especially important, not only to counter the risk, but to help defray expenses associated with the loss of income should an injury or accident occur.
Beyond the Basics
For a home-based small-business owner, it is imperative to keep good records and insurance for all business-related equipment. Standard homeowner policies typically exclude the business use of computers, cell phones and other technology. Instead, stand-alone policies can help provide protection against everything from equipment failure to unexpected emergencies. It’s also a good idea to add a loss-of-income and enhanced liability protection to guard against unanticipated events.
Other Forms of Coverage
Following are some other important forms of coverage:
Inventory: Working from home is convenient, but don’t become complacent when it comes to storage. Protect your investment by insuring inventory and business-related equipment separate from personal belongings.
Liability: Whether you are a private consultant or full-time eBay business, running a small business often entails risk. Protect yourself and your business by purchasing additional liability coverage specified to your individual needs. If you work with client data or confidential information, be sure to ask your agent about coverage options that include data loss or theft provisions to protect you and your clients.
How to Get Started
Purchasing insurance for your home-based business is relatively simple.
Following are some things to consider:
Assets: Make a list of current coverage needs and compare against those supplied by a spouse, other employment or outside providers.
Be Realistic: It may be tempting to “self-insure” equipment or convince yourself data loss is unlikely, but it’s important to be realistic. What situations are you most likely to encounter in your type of business? What are the consequences in a “worst case” scenario? Which could you survive, and which would potentially put you out of business?