People are working at home more than ever now. However, few realize they need special insurance for their home-based business. After all, they have homeowners insurance…they’re covered through that, aren’t they?
Unfortunately not. But if you didn’t know this, you’re not alone: According to the Independent Insurance Agents and Brokers of America (IIABA) 60 percent of home-based businesses lack sufficient business insurance coverage.
There are three types of insurance designed specifically for home-based businesses:
Homeowners insurance policy riders
Adding a rider to your homeowners insurance is the most economical, with an average cost of under $15 a year to obtain about $2,500 in additional coverage. This isn’t a lot, but it will often make a big difference to smaller companies; this option is usually only available to businesses with $5,000 or less in gross annual business and not much equipment.
In-home business policy
This policy is more appropriate for someone with several employees and a lot of business traffic in and out of their home. It provides more coverage for a variety of incidents, on average $10,000 or more, and costs about $200 a year on average. This policy also includes general liability coverage from $300,000 to $1 million, and limited coverage for loss of valuable documents or information, off-site business property coverage, and use of commercial equipment.
In most cases, you also will be covered for lost income and continuous overhead expenses (such as Internet service, website hosting, and phone service) if your business closes temporarily.
Business owners policy
Also known as a “BOP,” this is what most small- to medium-sized businesses need, and it is a great choice for home-based businesses that have items manufactured or produced elsewhere but run the business from home. It’s also good for those who make products at home to sell elsewhere or online. It includes all the coverage options seen in an in-home business policy, but on a larger scale.
Peace of mind
Paying for additional insurance policies may seem like more bills added to the pile, especially when you’re starting out and want to minimize your expenses. However, it’s one of the most important things business owners can do.
The consequences to a home-based business of not having the right commercial coverage can be dire. Losses will have to be paid out of your own pocket. If you can’t cover them, you could face lawsuits and may be forced to release assets such as your home, savings, business, or more.
Worst case scenario: You may have to return to being an employee to pay off the judgment through your wages. Until a judgment is paid, your assets will continue to be seized, likely meaning you’ll have to shut your doors for good.
Of all the worries you have as a small home-based business, having the right insurance coverage will minimize at least one; effectively, having the right insurance provides peace of mind.
Look at it as an investment equal to the protection you may get from working for someone else.