Most people who operate a home-based business give little thought to insurance coverage relative to home-based activities. Unfortunately, this oversight could be a costly mistake.
A home owner’s insurance policy provides adequate coverage should your private dwelling incur loss or damage, however the policy may be declared null and void should the insurance company discover their client is operating a business from the insured location without making them aware of it.
Business owners are responsible for providing sufficient insurance coverage whether the operation is based from their home or elsewhere. Insurance needs vary Depending on the type of business being run from the home.
Contents Insurance
o Home-based business operators should ensure they have enough contents insurance to cover office equipment and supplies. The average homeowner policy generally has a ceiling of around $2000 – in most cases this amount would be totally inadequate should it become necessary to repair or replace damaged or stolen equipment. In addition, most home owners’ policies are only liable for goods damaged within a residence, so without additional coverage, mobile technological devices such as a laptop or PDA device would not be covered if stolen or damaged when away from the insured property.
Vehicle Insurance
o Home business operators who use their vehicle while conducting business must have proper insurance coverage to make certain vehicle, property or personal damages are fully covered in case of an accident.
General Liability Insurance
o General liability insurance is a pre-requisite for any home based business. Should a client, delivery person, employee or any other person attending the home business on official business become injured, basic home insurance may not be apply and liability could be denied should the business be sued for damages. Therefore, a home-based business should ensure they have adequate liability insurance to cover all contingencies.
Product Liability Insurance
o If a home-based business sells products, it would be prudent to obtain product liability insurance should a claim arise due to a product defect that could be linked to personal injury.
Professional Liability Insurance
o Home-business operators who provide advice or a service to the public should carry adequate professional insurance in the event their service inadvertently causes financial damage to a client.
Workers’ Compensation Insurance
o Any home-based business person who has employees must carry comprehensive workers’ compensation insurance in case an employee is injured or killed while working. In many jurisdictions this requirement extends to the owner of the home based business as well.
Business Interruption Insurance
o This type of coverage protects a business in the event of loss of revenue as a result of forced closure of the business (i.e. flood, fire, power outage).
Disability & Life Insurance
o Although undoubtedly an expensive undertaking, disability insurance is important to cover an owner’s lost income should they become seriously ill or disabled. Life insurance is necessary for any small business operator to cover operational expenses should the owner die.
Although the above list appears daunting, most financial institutions and insurance companies can offer insurance packages that bundle various coverage under a blanket policy. Trade Associations and other professional and business organizations offer insurance plans and/or discounts on insurance premiums for their members. The cost of insurance is significantly lowered when multiple types of insurance are obtained under one umbrella policy.
Home Business operators should first determine exactly what type and how much insurance coverage they require. Often a home insurance agent can provide limited types of coverage by adding a rider to the owner’s existing home insurance policy. However, very often these riders are not nearly comprehensive enough to offer adequate protection from the many perils that can adversely affect small business owners.
As with any other product or service, home-based business owners should conduct careful research prior to obtaining Insurance coverage. Obtaining three or more quotes for comparison will assist in determining where the best coverage can be obtained at the lowest price.
Once all research is complete, the wise home-business owner should not hesitate to obtain adequate insurance for the business. Although the price may seem prohibitive at first, the cost of not having insurance could be catastrophic.
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