Home Based Businesses Need Special Insurance

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.

How to Protect Yourself From Maxed Out Liability Limits

You probably know it’s important for homeowners to carry umbrella liability insurance, but were you aware businesses need it, too? In fact, practically every business faces situations where it would be beneficial.

What it covers: Even if you carry other commercial policies, each policy has coverage exclusions and liability limits. Umbrella policies, typically available with $1 to $5 million in extra liability coverage, can help pay expenses resulting from exclusions or maxed-out liability limits. In the event of claims or lawsuits, it covers costs such as legal fees, court-awarded settlements, out-of-court settlements, and incidental expenses. These costs can add up quickly, meaning other commercial policies may not be sufficient.

Umbrella policies may pay expenses from personal property claims or bodily injury claims that other commercial policies (property, workers compensation, or commercial auto insurance) won’t. And it serves as supplementary coverage if liability limits of other commercial policies are maxed out. For example, a liability claim made against your general commercial policy is awarded a $5 million settlement. Your general policy’s liability limit is $2 million.

The general policy would pay $2 million, and your business would be responsible for the remaining $3 million. You could be stuck paying the difference yourself, or your umbrella coverage would kick in and pay the $3 million. Which would you prefer? If you’re a business owner without umbrella insurance, you’re missing crucial protection that could keep your business from closing. Your agent will help you find the umbrella coverage that’s best for your individual situation.

The Basics of Insuring Your Collector Car

When you begin shopping for collector car insurance, ensure you familiarize yourself with the different coverage types available and the eligibility guidelines. Below is information on the coverage available for your collector car and eligibility guidelines. Ask your insurance professional for details and advice on the best type for you and your car.

Actual cash value: Similar to standard auto insurance, unless you can prove it is an “exception” to depreciation, you’ll receive whatever it would cost to replace the car, less depreciation. If the car is totaled, the most you can hope for is what you paid for it. With actual cash value, you can choose your comprehensive and collision deductibles.

Stated value: The insurer will pay the insurance value you’ve put on it. You’ll need to prove via appraisals that the car is worth your stated amount. This may sound easy and as though it’s the best option, but most insurers won’t agree to full-stated value coverage, and it generally carries a $1,000 deductible.

Agreed value: This is the most common coverage type for collector cars, and refers to values you and your insurer agree upon. There usually isn’t a deductible.

Eligibility: Rating factors used to assess eligibility are those used in standard policies, but some factors are weighted more heavily when applied to antique car insurance. Some policies have monthly mileage limitations, normally about 250 miles. If you drive the vehicle only a couple times a year, or to parades or shows, ask for a lower mileage limit. It may mean a cheaper premium.

For affordable premiums and to maintain eligibility, you need to

  • maintain a good driving record
  • show a 10-year driving history
  • not include on your policy teenage drivers or drivers with poor records
  • ensure the vehicle is in a safe place – preferably in a locked area – and parked off-street
  • prove another car is used for daily transportation

Want to Raise Your Deductible? Get a Piggy Bank

In the old days, homeowner policies had flat-rate deductibles – $1, 000, for example – regardless of home value. In the 1990s, that began to change, and the norm became deductibles based on a percentage of the home’s value. How does this work, and does it play into raising homeowners insurance deductibles?

Assume your home’s value is $300,000. A 1 percent deductible equals $3,000, a 5 percent deductible, $15,000, and so on. As property values rise, some homeowners choose to raise the percentage and lower their premium.

However, this may be risky. If you do raise your deductible, you need to ensure you always have assets on hand (in a piggy bank or dedicated account) in case something happens.

Paying the deductible: Be aware that it’s your responsibility to cover the deductible amount. So if a freak wind storm damages your property and you aren’t able to pay the deductible out of your pocket, you may find yourself having to raid your piggy bank to pay the deductible or cover the damage yourself.

Ask your agent if raising general policy deductibles will affect “situational” deductibles. These are common for homeowners living in high-risk areas such as on the coast; in these areas, some insurers automatically impose 5 percent deductibles because of hurricane risks. Other situational deductibles apply in areas prone to earthquakes. Although percentage deductibles are mostly the norm, some policies still have flat-ate deductibles. Whichever is part of your policy, raising deductibles is still a great way to lower premiums.

Is Long Term Care Insurance Right for You?

As our population ages, many of us are coming to the realization that we may need long-term care at some point in our lives. An estimated 70 percent of Americans aged 65 and over will eventually need some kind of long-term care, and almost 40 percent of seniors will need nursing home care, at a cost of about $75,000 a year per person. As well, some people will need long-term care for reasons aside from age.

Although seniors become eligible for Medicare at 65, it doesn’t cover all medical expenses. The answer? Long-term care (LTC) insurance, which covers expenses that other health insurance policies don’t, such as medical care and nursing assistance, whether received at home or in medical facilities. Consider purchasing LTC insurance in the following situations:

  • If you have substantial assets: Those with assets to dedicate to long-term care may not need LTC insurance. But if you’d rather pass along your assets to family, this is the best answer.
  • If you have moderate assets: This applies to the majority of Americans. You can decide not to purchase LTC insurance and spend all your assets on care until Medicaid kicks in. Or you can protect assets you already have, while simultaneously providing future coverage, by buying insurance.
  • If you want choice: If you’re paying for long-term care with personal assets, your choice may be limited due to the high cost of many LTC options. Medicaid also will only cover certain expenses and facilities. With LTC insurance, you can choose a policy with options you want.

Most LTC insurance policies cover

  • home visiting nurses
  • home-delivered meals
  • chore services
  • adult daycare
  • caregiver respite
  • physical therapy
  • assisted living and nursing home services.
  • caregiver training for family member care providers.
  • the costs of installing at-home wheelchair ramps or household modifications (depending on the policy).

Confused About ACA Penalties? This Primer May Help You

The Affordable Care Act (ACA) is confusing for many, and the penalties associated with it are no exception.

Will you have to pay penalties? If you and your dependents don’t have minimum essential coverage that meets the ACA’s individual requirement, there are several groups and categories that are exempt, including:

  • those who have coverage through their employers and those who purchased coverage by the ACA deadline;
  • those who found the cheapest plan available to them was over 8 percent of their income, those with annual household incomes below $10,150 and/or those who face other economic hardships;
  • Native Americans and non-US citizens;
  • Federally recognized religious groups whose religious beliefs clash with ACA provisions;
  • members of federally recognized healthcare sharing ministries.

Those subject to penalties include: Individuals who go three consecutive months without coverage; as well as those who only have insurance for part of the year.

How much are the penalties? In 2014, without coverage, you owe the highest of the following: 1 percent of annual household income; or $95 per uninsured adult annually, $47.50 for children under 18, and up to the maximum of $285 for families. If you don’t pay, the ACA doesn’t include measures for penalty collection, so the IRS can’t press criminal charges or get property liens.

Converting Your Term Policy to a Permanent One

If you’re looking for life insurance, you probably already know there are several options available, including term life and permanent life. Which of these options is right for you?

Term life insurance provides coverage for a set period of time, such as 20 or 30 years, and expires when that period ends. Permanent (or “perm”) life insurance, on the other hand, lasts until your death.

Which you choose will depend on a number of factors. Term life insurance may be appealing because it is often the most affordable.

You might consider purchasing a term life policy if you’re trying to ensure you’ve provided for a specific event, such as paying off your mortgage.

Permanent life insurance may be more expensive, but it also offers the security of knowing that your beneficiaries’ needs will be covered for your lifetime (and that it may create a savings account that grows tax-deferred). You might consider this type of life insurance if you don’t have a time-limited event you want to provide for.

Keep in mind that while term and permanent life insurance are the two major options, they aren’t the only ones. For example, with “convertible” policies, it’s possible to convert term life insurance into permanent life insurance at a later date. This may be a useful option for you if you develop a chronic health condition that makes it difficult to qualify for new coverage after your term expires.

In general, it’s always a good idea to seek guidance from a professional when looking into life insurance. He or she knows your situations and is best able to help you sort through the options. The quality of the life insurance policy is often connected to the quality of the life insurance company.

Your advisor can help you check rates and ratings, and select the policy that is best for you given your individual circumstances and goals.