If you’re operating a business from home, there’s a good chance you’re doing so without any type of business insurance coverage.
Around 60% of home business owners don’t have coverage that protects their business and assets in the event something unexpected should happen.
Not every home business handles enough product or customers to justify the need for business insurance, and it can be difficult to determine if your business needs the protection insurance provides.
This guide will help you analyze your business, its needs, and whether or not you could benefit from insuring it.
Does Your Home Business Need Insurance?
Why do so many business owners choose not to insure their home business?
You might not think you handle enough product (or profit) to worry about insuring your home business. It might be a part time endeavor, and you just don’t think purchasing business insurance seems necessary right now.
Doing business from home can also cause a little confusion when it comes to insurance coverage. Homeowner insurance policies typically don’t cover home businesses, and have been known to refuse claims or cancel policies after business-related claims were filed.
If your home business means people are coming in and out of your home, you should insure your business. If anything were to happen while someone was in your home/business, your homeowner’s insurance would not cover the injury and you would be left 100% responsible for the losses.
3 Types of Home Business Insurance
There are 3 basic types of insurance coverage you can secure for your home business. Depending on the size of your business, you will need different amounts and terms of coverage. The types range from homeowner policy add-ons to full business owner policies.
Read through to find which type of insurance coverage your home business falls under.
1. Rider on your homeowner’s insurance policy
Who needs it: No employees, just the owner
If you’ve already got homeowner’s insurance or renter’s insurance, you can go for the most cost effective business insurance option and choose an add-on, or rider, to cover your company. You might pay around $100 per year for somewhere in the range of $2,000-$3,000 of coverage, making it the best option for small businesses just starting out.
2. In-home business insurance policy
Who needs it: 1-3 employees
This type of coverage includes many more contingencies, or things that could go wrong, with a business that add-ons (riders) do not. Your home insurer or a specialty in-home business insurance firm will put this type of policy in place for you and will cover up to 3 employees. More expensive than the rider plan, the rates for in-home policies typically run from about $250-$500 with coverage up to $10,000.
Even if you don’t have any employees yet, if you’re working with business equipment or people are regularly coming in and out of your home, you need this type of coverage. Injury could happen to anyone on your property and without the proper coverage, you will be responsible.
Make sure to check your state’s rules for business insurance coverage for home-based businesses.
3. Business owner’s insurance policy
Who needs it: Brick and mortar retailers, 5-10 employees
This type of coverage is suited for home businesses that open their doors to the public and run it as a brick and mortar retailer instead of a virtual business. Home businesses that need upwards of $10,000 in coverage choose business owner’s policies.
A wider range of contingencies are covered under these policies, including liability and loss of income. There is a higher coverage amount, too–around $500 buys a $2 million business owner’s policy. If you want to ensure your small business is fully protected, opt for this type of coverage.