Home businesses have sprung up and grown in popularity over the years. With the ability to do more work tasks online, hundreds of entrepreneurs have started businesses from their homes, and thousands more have arranged to do their work remotely.
Maybe you manage a lawn care company from your house. Or maybe you're making jewelry in your garage and selling it online. Perhaps you offer tax services from your home office. Whether you're producing goods, shipping them, or offering services from your home, there's a solid chance you need insurance for the company you're running. You might think your business is too small to be worth insuring, but that's often not the case.
Will Home Insurance Be Enough?
Many small business owners or in-home workers don’t consider getting extra coverage because they believe they’re already covered. Many individuals believe their homeowners’ insurance policy covers them for anything that would happen to their home-based business.
This couldn’t be further from the truth. Many people running businesses from their homes don’t have any coverage from their homeowners’ policy.
In fact, their business operations could even render parts of their home insurance null and void in the event of certain accidents or situations.
Say one of your customers comes to your house to pick up some goods they purchased and, on their way into your home, they slip and break their wrist. Since they were there to do business and not as a guest, you would most likely not be covered in this scenario. If you relied on your homeowner's insurance to cover your business, you could be on the hook for your injured customer's medical bills (to learn more, see 4 Essential Types of Liability Insurance Every Business Should Have).
What Type of Coverage Do You Need?
If your homeowner's insurance won't give you the coverage you need, what will? Here are five options for you to consider.
All Risks Rider
Many people managing small businesses from their homes should consider an all risks rider. This form of coverage is attached to your home insurance policy through your same provider. The coverage typically offers between $2,500-10,000 in extra protection for your business.
While this may not seem like a lot, the $10,000 in coverage usually only costs a business owner $100-200 a year. The money can be used to replace damaged equipment used for business or to ensure you’re covered if someone coming to do business with you gets injured on your property.Public Liability Coverage
If your home business has a lot of guests, then you’ll need to consider a different form of coverage. Maybe customers visit your home to make purchases. Your co-workers could stop by to discuss important business matters. Or you may conduct business meetings with potential clients from the house.
If you do any of these things, then getting public liability coverage could be ideal. The coverage offers certain levels of protection when visitors are on your property for anything business-related.
With this coverage, you’ll have protection against losses or damages from any claim a visitor makes after conducting business on your property. Legal fees and other potential expenses will be covered, too.
Employer Liability Insurance
If you have employees that work from your home, then you’ll need employer liability insurance. This is not an optional coverage. Most states legally require employers to carry certain forms of insurance to protect their employees.
If you’re about to hire or have recently brought on employees, make sure you speak to an insurance agent about how to properly handle insurance. There’s no reason to run the risk of not having the proper insurance for your employees. Do your homework and find out what types of policies are needed.
In-Home Business Policy
If you run a small home-based business that you take seriously, then an in-home business policy may be a great idea. These policies offer a wider range of protection compared to riders and liability coverage.
Most in-home business policies cover you against theft, damages, loss of critical documents, protection for up to three employees, and more. Most insurers recommend these plans for businesses making a profit that have people coming and going each day.
An average in-home business policy costs around $300-500 a year depending on your business. They can offer protection up to $10,000 of coverage. There is a plethora of different in-home business coverage options for each type of company. You’ll have to find out which type of coverage you qualify for in your state.
Business Owner’s Policy
If you need more than $10,000 in coverage for your in-home business, then most insurers will treat your home-based business like a traditional brick-and-mortar company. This means you will require a business owner’s policy.
These policies are typically quite comprehensive. Some small business owners requiring this coverage tend to have expensive equipment, high-profile clients, or more than three employees working from their home.
Business owner’s policies offer coverage for damaged or lost equipment, loss of critical documents, liability for customer or employee injury, malpractice liability, business interruption, and more.
Business owner’s policies can offer near unlimited amounts of coverage. For example, a small-time photographer with $20,000 in equipment could purchase up to $2 million in coverage for under $1,000 a year.
Freelancers and Employees Working From Home
People who do not run a business but work from home as freelancers or company employees often present gray areas. For employees, the insurance policy they have from their employer should cover most things. If an employee is injured working from home, then workers’ compensation will still kick in.
If an employee sees clients or other employees at the home for business purposes, then the company should provide public liability insurance for the individual working from home.
Many freelancers, on the other hand, do not require much insurance. If a freelancer is working with small clients on a purely online basis, insurance shouldn’t be a large issue. However, to be safe, it is still a great idea to purchase an all risks rider (for more on freelancing and insurance, see Working a Freelance Job? Consider These 3 Health Insurance Options).
If the freelancer sees clients at the home or works with huge projects, then getting certain insurance policies is prudent to eliminate any extra risk for the individual.
Ask an Expert if You're Still Unsure
For the majority of people using their home to make money, picking up some type of insurance policy seems to be a good idea. The best course of action is to speak with an insurance agent when you begin operations to get personalized advice on your coverage needs.