Home Based Business Insurance


Home-based business insurance is often overlooked. Many home-based business owners own their own homes, and assume that their home insurance also covers their home-based business activities.

Not only is this not true, but your home-based business activities can void your home insurance. Home insurance covers people’s homes. Using the home for other purposes that your insurer is not aware of, such as operating a home-based business, may invalidate your policy.

What kinds of home-based business insurance do you need? The answer depends very much on exactly what kind of home-based business you’re operating.

While many home-based business owners rely on their home insurance to cover damage, loss and theft of property, all home-based businesses should have contents insurance in addition to the contents and or property insurance provided by the owner’s home insurance. For one thing, look around your home office and make a quick estimate of how much it would cost you to replace the equipment surrounding you. Most homeowner’s policies have a limit of about $2000 for claims in the event of a loss. How much of your home office equipment would you be able to replace for that amount if it was stolen?

For another, does all the business equipment you use stay in your home all the time? Business equipment will only be covered by your homeowner’s policy while it is on your premises. If you have a laptop computer or a PDA that you use outside of your home, you’ll need separate contents and property insurance for it.

Another type of insurance that all home-based businesses should have is additional general liability insurance. If your aunt is visiting and falls and breaks her leg, your homeowner’s policy will cover it; if a client is visiting and falls and breaks her leg, it won’t. General liability insurance covers injuries to clients and employees on your business premises and elsewhere.

Whether or not you need these types of home-based business insurance depends on what kind of home-based business activities you’re engaged in.

For instance, do you use your vehicle for business purposes? If so, you need to have your vehicle properly insured for business use to cover any damage to your vehicle and to cover your liability to others if you’re involved in an accident.

Does your home-based business involve selling a product? Then you should consider getting product liability insurance to protect your business from liability resulting from the product’s nonperformance.

Does your home-based businesses provide services? If so, you will definitely want some kind of liability insurance. Professional liability insurance protects both you and your clients. If a client claims to have suffered damages through your actions as a professional, your professional liability insurance will shield your personal assets and pay for your defense against such a claim. Such coverage also ensures that a client who has suffered damages will be adequately compensated.

There are many different types of professional liability insurance that home-based business owners may need. Malpractice insurance protects you from damages caused by a treatment that goes wrong. While we immediately tend to think of professionals who provide medical and health-related services such as doctors, dentists, and physiotherapists, when we think of malpractice insurance, there are actually many other home-based practitioners who may need such insurance, ranging from hairdressers through dog groomers.

If your home-based business involves being paid to give professional advice, you need errors and omissions insurance. If a client claims that he or she has suffered damages because your advice was inadequate or incomplete or because of a negligent act on your part, error and omissions insurance will cover your defense and the damages awarded to the client if the case goes against you.

And if your home-based business involves providing services at client sites, you may need completed operations coverage to protect you from liability that could arise after you have left a client’s premises, when your client starts to use whatever you were working on and injury or damage occurs.I also strongly urge all home-based business owners who depend upon their business as a source of income to consider buying disability insurance, which will cover your lost income if you’re disabled and unable to carry on your business.

You may also want to consider purchasing business interruption insurance, which will cover your lost revenue if you’re forced to suspend your business activities because of fire, flood or other disasters.

But if you’ve investigated the cost of even one of these types of insurance that you think your home-based business needs, you know that business insurance isn’t cheap. How can you cut your costs on home-based business insurance? Read on…

The cost of all insurance has risen dramatically since 9-11 and home-based business insurance is no exception. How can you save money on home-based business insurance?

Prepare a home-based business insurance shopping list and prioritize your home-based business insurance needs.

For instance, business interruption insurance would be nice to have, but if you’re a professional home-based business owner offering financial planning services, you have much more need of errors and omissions insurance.

Look for home-based business insurance packages.

Many insurance companies offer business insurance “packages” now that bundle types of insurance together. For instance, (just to name one), State Farm Insurance offers a Business In The Home Program which combines Property, Liability, Loss of Income and Records insurance policies. You save money by paying one premium rather than paying the premiums on different types of insurance separately.

Take advantage of group rates by purchasing your insurance through a professional or business organization.

Many different business organizations offer insurance plans and/or discounts on business insurance to their members. The bigger the group, the more diffuse the risk and the lower the insurance rates are. You will have to pay to become a member of the group or association, of course, but you could still end up saving money compared to the cost of purchasing the same kind of business insurance the group offers on your own.

There are professional organizations for every business occupation from computer consultants through veterinarians. General business organizations, such as your local Chamber of Commerce, The Better Business Bureau and SOHO, also offer business insurance discounts. Your local Home-Based Business Association may also offer members lower prices on home-based business insurance; if not, it will certainly be able to provide you with some good leads.

Talk to your home insurance agent.

Most companies that offer home insurance will provide additional insurance for home-based businesses by adding a rider to your existing home insurance policy. (If you go this route, however, be sure that the rider includes all the types of insurance your home-based business needs, because these riders generally exclude product liability, disability insurance, or professional liability insurance.)

Compare, compare, compare.

Before purchasing any business insurance, do your homework and get quotes from several different companies. The first deal you hear may not be the best deal. Start with investigating professional and/or business groups related to your home-based business activities and their insurance benefits because these groups offer other benefits as well, and then approach several different insurance agents to see how much such insurance would cost you as a “private” person.

When your research is done, bite the bullet and get the home-based business insurance you need. It will seem expensive, no matter how good a deal you get. But the cost of not having home-based business insurance could be so much higher.



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