Are you an entrepreneur who operates a home based business? If you do, you should take time out to learn how having a Business Owner’s Policy and General Liability Insurance in place could protect you.
Many home based business owners assume that their homeowner’s insurance policy will protect their business assets. That is not always the case.
It’s up to you as a savvy business owner to make sure that you obtain adequate protection for your business assets. These assets include your equipment, technology, and business records.
It’s essential that you discuss your home based business with your local insurance agent up front. Operating a business out of your home outside of the parameters of your homeowner’s insurance means that you could compromise both your home and your business. This risk results from the fact that business activities may not fall within the scope of your homeowner’s policy.
Take general liability insurance, for example.
Imagine you offer violin lessons out of a studio in your home. Your student arrives for a weekly session, and it’s a rainy day. The driveway is slick from the moisture, and the student falls and breaks her wrist. Because that person was visiting your premises for business reasons, your homeowner’s insurance might not cover the claim.
Because you did not disclose your business activities to your insurance agent, you are left holding the bag on paying for this injury. This is not to say that you intentionally misled your agent; indeed, you could have started your business after you already had coverage and you simply forgot.
How to Tell if You Need to Insure Your Home Based Business
Home based business owners hold tremendous responsibility to protect not only their income but also the safety of those with whom they do business.
Here are five questions to help you assess whether or not you need home business insurance. If you answer to any of these questions is a head nod, then you should be dialing the phone to your local insurance agent.
- Do clients ever visit my home office?
If clients stop by to pick up orders, drop off checks, or meet with you, you are at risk and need the protection General Liability Coverage.
- Are my supplies, equipment, or inventory stored at my home?
In the event of a loss, replacement of even basic equipment like computers, workstations, printers, and other electronics can add up to thousands of dollars quickly. If you have specialized equipment such as tools, ovens, camera equipment, or technical equipment, it’s even more.
- Would my business and income be impacted if my home were damaged by an unforeseen event like a fire or storm?
Repairs to your home can take weeks after major damage occurs. Your Business Owner’s Policy may help you recover your lost income through Business Income Coverage.
- Am I storing employee or customer data on my computer or in paper files at my residence?
You are responsible for client safety, either online or in person. Data Breach Coverage is essential today, especially if you collect sensitive data like credit card numbers or demographic information.
- Do I have employees?
As you grow your company, you might need to hire employees eventually. Like it or not, this comes with a unique set of challenges. Even if your employees work off-site and not on your home premises, you are responsible for their safety. In this case, your agent could advise you to obtain both worker’s compensation and employment practices liability insurance.
Worker’s compensation protects you from paying for medical expenses if an employee becomes injured while on the job. On the other hand, employment practices liability shields you from the expense of legal fees in the unlikely event that an employee accuses you of violating employment practices such as harassment.
Your local insurance agent is your business’s best friend and ally. He or she can guide you on the implications of doing business in your state and help you find the best coverages.
What If I Don’t Have These Coverages?
Without the appropriate coverage, you leave your business open to paying out of pocket costs for:
- Property damage
- Employee injuries
- Client injuries
- Data breaches or data loss
- Lost income
Your business is your livelihood. It’s likely that any one of these incidents would place a significant financial burden on your business; it’s one that could even force you to close up shop.
The Bottom Line
Operating a home based business is a great model for many entrepreneurs today. But, without sufficient insurance coverage, that dream of business ownership can turn into a nightmare. Seek guidance from your local insurance agent on what protection you need.