Running a business from your home may seem like an easy task, but it requires utmost diligence and planning. Right from the early stages of setting up your home-based business, you need to make sure that you include insurance coverage to protect it.
Getting insurance coverage for home-based business is often not among the top priorities for the owners. It is a common misconception that a home insurance will also cover the business operations conducted from the premise. The truth is that renters’ and homeowners’ policies do not cover home businesses.
You need to know that your home-based business can, in fact, lead to the cancellation of your home insurance. Therefore, inform your insurer about your plans to run a home business before you actually start operations.
Insurance for Your Home-Based Business
Just like for a traditional business, the insurance plan for your home-based business will cover your office premise, all equipment, business inventory on and off-premise, and business interruption insurance, among other aspects. Further, it will cover additional liability for clients and employees. Your home business must comply with federal, state and city regulations to be eligible for insurance coverage.
Read on to know the key policies that can cover damages and should be part of your home-based business insurance scheme:
1. Business Property Insurance
Several home-entrepreneurs rely on their home insurance to cover certain aspects of damage, loss and theft of property. But, you also need to have business-related insurance in addition to the property insurance.
Business property insurance protects all physical assets of your company such as the office space, its contents and any outdoor fixtures.
Calculate a rough estimate of the business equipment and the workspace used for business operations. This will help you determine the value (in terms of dollars) of business equipment such as cell phones, laptops, printers, etc. in the event of a loss.
2. General Liability Coverage
Another type of insurance coverage that you can include in the insurance package for your home-based business scheme is an additional general liability coverage. This coverage will cover medical expenses and costs for damage to property in case of an accident, wherein your client or employee is injured on your business premise. Check with your insurance provider to see what policies make the most sense for your business.
Additionally, remember that the coverage you need depends on the type of business you are in and the probable risks associated with it. For instance, a building contractor will need more coverage than a web designer or a blogger.
3. Business Vehicle Coverage
This insurance coverage can be beneficial if you use your personal vehicle for business purposes. Remember personal auto insurance policies do not cover vehicles used for business purposes.
You need to get your vehicle insured so that in case of an accident, this coverage can help you claim your losses and cover your liability to others who may be involved in the accident.
Even if one of your employees is at fault when driving your business vehicle, you can be held legally responsible for injury/damage caused by the accident. You need to be aware of the following two liability coverages and ensure that you are covered by them:
- Bodily Injury Liability: This insurance claim covers medical costs, loss of income and funeral expenses of the injured/deceased person(s) involved in the accident.
- Property Damage Liability: This claim helps in protecting you from paying for the repairs or replacement of another driver’s car in the accident.
4. Product or Professional Liability Insurance
Whether your business sells a product or a service, product liability insurance and professional liability insurance are important coverages that you shouldn’t neglect.
Product liability coverage will protect your business if it is liable for damages to a person or property caused by a product that is designed or manufactured by the company. In case, you are not the manufacturer, but the supplier of the product in question, it is advisable to consult with your insurance professional on the need for this coverage.
Professional liability insurance can protect you when a client claims to have suffered damages through your actions as a professional. Your personal assets will be covered in this cover and at the same time, the client who has suffered damages will be adequately compensated.
Several subcategories of product/professional liability insurance are industry-specific. If your business is a part of the healthcare sector, you may want to invest in getting a malpractice insurance coverage for your business to protect it from damages caused by any medical treatment that has gone wrong.
5. Business Owner Package Policy (BOP)
As a home-based business owner, you should consider including a business owner package policy (BOP) for your firm. This policy is extremely useful if your work involves conducting business operations outside your home.
BOP plans involve discounts on insurance premiums by combining multiple insurance coverage needs of a business into one policy. It protects against unexpected business interruption, damage to business equipment or data, and malpractice or professional liability claims.
If you conduct your business inside as well as outside the home or are involved in a high-risk profession, you may want to consider this policy.
Running your own business means that you need to take a lot of risks. This is all the more reason for you to make sure you have the right insurance policies for your business to avoid any setbacks to your success.
You must compare various insurance coverage schemes offered by insurers to know the actual cost of obtaining these policies. Depending on the nature of your business, select the insurance schemes that will protect your assets in potentially risky situations.