How to Insure Your Home-based Business

We live in a world where home life and work-life are often blended. More and more of us work remotely from our homes, many of us establish full or part-time businesses based in our homes, and others may work elsewhere but still maintain a home office dedicated to our work.

Working from home has many advantages, but it also invites risk. And that's something most of us don't consider. If you work from home in any capacity, take a few minutes to read about the insurance coverages available for different types of home-based businesses. You might find it could benefit you.

Working from Home

Workplace trends have leaned toward increasing remote workers, and recent global events have pushed many more of us into this arrangement. Whether you work one or two days a week from home, or you're based there full time, you might benefit from additional coverage.

Think about what working from home entails. You've likely invested in computer equipment, electronic equipment, office furniture, and office supplies. Have you thought about how much it would cost you to replace all of that? What about the cost of recovering data or lost income in the event of damage to your home office equipment and files.

Your existing homeowner's coverage likely excludes all of this. Standard coverage may cover up to $2500 in business-related losses and only $250 for property damaged when you're working away from your home office. These limits are pretty low, so you might look into adding an endorsement or amendment to your current policy to cover home office expenses. It's possible that a simple modification to your existing homeowner's or renter's policy could help provide the extra coverage you need.

Home-based Business

The Small Business Administration says that over half of all small businesses are based on someone's home. If you're one of them, you could be exposed to risks that aren't covered under a standard, or even amended, homeowner's policy. Fortunately, you can get protection from a Home-based Business policy. Most policies will cover up to three employees. Below is a list of a few things this coverage can help cover:

  • Structures on your property used for your business
  • Business equipment and furniture -- on and off your property
  • Inventory
  • Business property belonging to others
  • Your accounts receivable
  • Electronic data and paper records
  • Loss of income
  • General liability coverage

A home-based business policy won't provide all your business insurance needs. You might also consider the following:

Auto coverage: If you drive for business reasons, transport goods, or make client visits, check to see if those activities are covered under your current auto.

Disability Insurance: Provides income in the event you become disabled or are unable to work. Disability insurance will not cover business expenses – it just helps replace your lost income.

Life Insurance: Without an employer-provided group life insurance coverage, you will need to consider buying your coverage. This allows you to still provide financial support to your dependents in the event of your death.

Health insurance: If your home business is your full-time profession, you'll need to provide health care coverage for yourself and your dependents. Participate in the Affordable Care Act Health Insurance Marketplace or compare private carrier policies for coverage that meets your needs.

Workers Compensation Insurance: If you hire employees, you must purchase Workers Compensation insurance. It's required in all fifty states and offers benefits to employees who cannot work due to an injury or illness resulting from their employment.

Small Business Level

Home-based insurance policies are intended for businesses that run out of the home. They usually limit the number of employees you can have and likely alter the amount you can claim on your business losses. If you feel you need more, you might consider a Business Owners Package, or BOP, policy.

Generally, a BOP policy will cover damage to or lose of property, loss of income due to business interruptions, and liability. You may also be able to customize a policy to protect you against crime, loss of merchandise, or to provide a fidelity bond. A BOP policy's advantage is that it combines different business insurance types into one package, often at a lower premium.

Different carriers will have additional requirements for qualifying for a BOP policy. It may be in your best interest to research various providers to see who can offer your needs' best coverage.
It's also important to know what a Business Owners Package won't provide. Below is a list of additional coverage you may need to purchase as a small business owner:

Employment Practices Liability (EPL): This protects you from discrimination, wrongful termination, harassment, and related allegations made by current or former employees.

Professional Errors and Omissions Insurance (E&O): E&O coverage helps pay legal costs and damages if you make a mistake that's detrimental to a client's business. It is also known as professional liability insurance. Financial planners use it, computer consultants, real estate agents and appraisers, mortgage brokers, and consultants, but the list of types of businesses this can help is almost limitless.

Directors and Officers Insurance (D&O): This coverage helps explicitly pay the legal costs and damages of officers sued for their performance in running the company.
As your home business grows, your insurance needs become more complex. No one policy can provide all the coverage you need. It's essential to keep an open dialogue with your insurance provider to discuss your coverage needs as your business evolves.

At Sea-Mountain Insurance, we're happy to discuss your business insurance needs and offer our advice on what you may or may not need. Call or contact us today for more information.