Running a business from home can offer a cost-efficient approach to reducing overhead and other costs. But home-based business owners should never assume that homeowners’ insurance covers their business activity.
Here’s a quick checklist of questions you should ask yourself to determine if you need business insurance and, if so, what type:
- Do employees work from or stop by your house in the course of their work?
- Do clients or customers come to your home office for any reason?
- What is the value of the business supplies you store at your home?
- Do you work within the house itself or in a side building or other structure on the property?
- Could your business continue if your home were badly damaged or destroyed?
- What’s the value of the business assets you store at your home?
- Do you maintain any confidential employee or client information in computer or paper files at your home?
If you answered yes to any of these questions, you should consider these general categories of business insurance coverage:
- General Liability Insurance. This covers you in a variety of legal actions including negligence, errors and omissions, and personal injury. All businesses should carry this insurance of course, it’s not unique to home-based businesses.
- Business Owners Insurance. Homeowners’ policies may not be sufficient to cover the inventory of equipment and supplies in your home office. Without proper homeowners’ policy endorsements, property and liability exclusions or limitations related to business activity will leave these business owners on the hook if the items are lost or damaged in the home.
- Workers’ Compensation. OSHA wants to see safe workplaces and makes little distinction between businesses in commercial vs. residential space. Musculoskeletal damage or trips and falls can happen anywhere – even within “the safety of your own home.”
Depending on the size, scope, and type of your home-based business, your insurance representative may be able to arrange for adequate coverage in some of these areas through riders on your homeowner’s insurance. In most cases, though, it will be advisable to establish business policies to make sure you have the protection you need to ensure business continuity in case of an event.