Learn About Business Insurance and How it Protects You and Your Company

You've decided to go out on your own and work for yourself. Like most of those before you, your place of business is in your home, mainly to keep your expenses down while you build revenue. Even if a home-based business is run out of a garage or the spare bedroom versus a retail space downtown, the same rules apply as if it was.

Talking to your insurance agent about your new home-based business is high on the priority list to ensure your new company is protected. To begin with, an insurance company can cancel an existing homeowners insurance policy in the event of a claim if they discover you've been running a home-based business. That could be disastrous for your business and your personal finances.

Here, we'll answer questions about what types of business insurance coverage you'll need and why.

Protecting Business Equipment

One of the main reasons to have home-based business insurance is to protect your computers, printer, scanner, phones or other equipment you use to provide products and/or services to your customers. Most assume that equipment property is covered within a homeowners insurance policy, which is true, but it is limited to $2,500 while in your residence and $250 when you're out and about.

If annual sales receipts are around $5,000 or less, your agent may recommend adding an endorsement to your existing homeowners policy that could increase your standard policy limits for business equipment up to $5,000. If your sales exceed that amount, consult your agent about in-home business insurance or a business owners policy.

In-Home Business Insurance Policy

With an average cost of around $300a year, an in-home business insurance policy is designed with lower policy limits and premiums in comparison to larger commercial business policies. A policy covers your business equipment AND your property. This means that if your home-office is damaged to the point where you have to stop doing business for a time, you're covered for any lost business and ongoing expenses, including payroll, for up to a year. It can also include general liability coverage, which can range between $300,000 and up to $1 million.

But—the level of property coverage can be limited to $10,000. Again, discuss this with your agent, who can recommend the level of coverage you'll need based on the type of business you're running and your level of revenue. If you need a higher level of coverage, he or she may recommend a business owners policy. This provides a broader level of coverage, but is limited to small to medium sized business that meet certain criteria.

Other Home-Based Insurance Items on the Checklist:

• Liability – Even if you don't have anyone working in your home except you, if a person comes in to deliver a desk or install your equipment and is injured while doing so, that can result in a lawsuit. There is also the area of professional liability that covers a variety of needs based on your business, including when you're working off-site and cause damage, or errors and omissions coverage. Liability coverage protects you for any damages where you are found liable, in addition to legal fees and medical expenses of those injured by your business.



• Inventory – If you run a home-based business that creates product, this protects your inventory in the event it is stolen or damaged, and includes all the materials used to create product.



• Business Vehicles – If you use your own personal vehicle for business purposes, your personal auto insurance policy can be rejected in the event of a claim if an accident occurred while the vehicle was being used for business. A business auto policy covers any costs that arise from third party property damage or bodily injury where you are found legally liable. Depending on your policy, it can also cover repairs to or replacement of your vehicle that's damaged during an accident, or as a result of theft, flooding, hail and other related causes.



• Fidelity Bond – If your business involves workers that perform services in other people's homes, such as a home-cleaning service, a third-party fidelity bond protects you against losses due to any fraudulent activities they cause, including theft.



• Worker's Compensation Insurance – This is required, even for small home-based businesses, if you have employees. Worker's compensation insurance covers your employee's medical care if they are injured on the job and provides a portion of their lost wages, whether they were at fault or not. The level of coverage and criteria for worker's compensation insurance varies from state and on the number of employees you have, so ask your agent what is best for your business.

See how much you could save today on your business insurance. Get your free business insurance quotes today!

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