Do You Need Home Business Insurance?
Created by FindLaw's team of legal writers and editors | Last reviewed September 13, 2022
If you run a business from your home, your homeowners' or renters' insurance may not cover you fully. There are thousands of people who run a business from their homes in the U.S. that do not realize that their homeowners' or renters' insurance may not be adequate coverage for their business.
As a result, you should acquire business insurance just as if you owned your own office. Even if you think that your business is too small to justify the purchase, you still need protection from all the risks that are associated with doing business.
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Homeowners' and Renters' Insurance Policies are often Inadequate
If you own and operate a small business from your home, don't be deluded into thinking that your homeowners' or renters' insurance will cover you and your home completely. Although there are some policies that will cover a home business (you should always check with your insurance provider), many policies specifically exclude coverage of home businesses. This means that if you have losses to your home business, you may not be covered. For example:
- If your home is robbed and your business computer is stolen, you may find that it is not fully covered by your homeowners' or renters' insurance because it is considered business property.
- If your home is burned down, you may find that your insurance provider refuses to compensate you fully because you neglected to mention that you also ran your business from your home.
- If a deliveryman is leaving your home when he slips and falls under the weight of the packages from your business, your liability coverage may not pay for his injuries because your insurance does not cover business deliveries.
- If you are thinking about starting a business in your home, or are already operating a home business, you should take the time to sit down with your insurance provider. It is generally pretty easy to add riders to your pre-existing homeowners' or renters' insurance policies to cover the most common business risks.
Cost of Replacement
When you go to talk with your insurance provider, you should make sure that your insurance covers the cost of replacement for your business equipment and furniture. There are many insurance policies that do not provide for the full cost of replacement and only offer the value of your used office property.
Sit down and do a frank assessment of how much it would cost to get your business back up and running if all of your business property were lost in a fire or a theft. If you use specialized business software (which can cost hundreds, if not thousands, of dollars), be sure to include that in the cost of replacing your computer. In addition, if you use expensive equipment in your business, be sure to figure out how much it would cost to replace.
When you have figured out how much it would cost to replace everything, go back to your insurance company and ask how much it would be to add that amount of coverage onto your existing policy. Remember that the higher the deductible you are able to afford, the lower your insurance premiums will be.
Business Liability Insurance
When you talk to your insurance agent about home business insurance, you should also talk to them about home business liability insurance at the same time. If you already carry a homeowners' or renters' insurance policy, you probably already carry liability insurance for those that come onto your property for a non-business purpose. However, these insurance policies generally do not cover accidents and injuries to those who are on your property for a business purpose (such as delivering a package to your home business, or coming to your home for a business meeting).
In addition to thinking about someone coming onto your property for a business purpose, you should also think about general liability insurance for when you leave your property for a business purpose. For example, your regular homeowners' or renters' insurance may not cover you if you injure someone while you are away from your home on a business purpose.
Also, there are certain types of businesses (whether run at home or outside the home) that require the business owner to carry special types of liability insurance. If you are in the business of rendering professional services, you should look into professional liability insurance. Likewise, if you make or sell products in your home business, you should probably invest in product liability insurance if there is a chance that your product could injure a customer. Lastly, if you have employees that work for you, you will probably need to look into worker's compensation coverage.
Just like homeowners' and renters' insurance, your pre-existing automobile insurance may not cover you for accidents you have in your personal car while you are on errands. So, if you have a truck you use solely for your business, or if you use your personal car for business errands or other business purposes, you should tell your insurance company and make sure that you get the coverage you need.
One thing to keep in mind is that your insurance company may not offer business automobile insurance. If this is the case, you will have to find a new insurance company that can offer you the services you require.
Lastly, if you have employees that use their own cars for purposes related to your business, you will want get special insurance. If an employee gets into an accident while driving around for your business, you (or your business) may be liable for the accident. For these situations, you will want to look into getting employer's non-owned automobile liability insurance.
Insurance Policies for Both Your Home and Your Business
Because home businesses are becoming more popular and normal, many insurance companies now offer insurance packages that offer both home and business insurance in one go. These insurance policies are general designed to cover your business equipment (including computers), whether the equipment is used in your home or elsewhere. In addition, these policies also include the kinds of liability insurance that home businesses need.
The main benefit of these bundled insurance policies is that they are generally less expensive than adding riders to your pre-existing homeowners' or renters' insurance. However, you should always check the types of coverage offered in these bundles carefully. Sometimes these policies are designed for home offices and may not fully cover you if you manufacture or store your products in your home.
Speak to a Business Law Attorney
When you are considering whether to get home business insurance, talk to an experienced business law attorney. A skilled attorney can explain the pros and cons of carrying these types of insurance policies.
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