Home-based businesses can be for accountants, carpenters, consultants, graphic designers, real estate agents and almost everything in-between. Depending on the business, there are several insurance coverage types available for constructing a good home business insurance policy.
A home insurance policy typically won't cover business-related property and injuries, or other business-related problems. To figure out how much coverage you might need for home-based business insurance, think about potential problems that insurance could cover. Some questions to ask are:
- Do customers or clients visit your home?
- Do you keep inventory or business supplies at home?
- Do you have employees who work in or outside of your home?
- Would damage to your home, such as a fire, interrupt business and cause a loss of income?
Generally, home business owners can buy coverage in one of three ways:
- Add an endorsement to a home insurance policy. If your home business doesn't have a lot of expensive equipment or merchandise, this might be a good option. For about $10 per month, you can get about $2,500 worth of business property coverage, according to Trusted Choice, a group for independent insurance agents. (This typically does not include business liability insurance.)
- In-home business insurance policy. This type of policy is suited for home businesses that have between $2,500 and $10,000 in assets, says Trusted Choice. You can typically get $10,000 in business property coverage and $1 million in business liability coverage for about $20 to $30 per month, according to Trusted Choice.
- Business owners policy (BOP). Consider BOP insurance if you need higher coverage limits and want to customize a home business insurance policy. BOP insurance typically includes business liability insurance, business property insurance, business interruption insurance and customizable coverage types.
Basic home business insurance coverage types
Business liability insurance
Liability insurance for home based business covers injury and property-damage lawsuits. For example, if a client trips and hurts themselves in your home or you accidentally damage someone else's property, like knocking over an expensive vase while visiting a client's home.
Commercial property insurance
This covers business property such as a work space and business equipment, like computers, inventory, office supplies and tools. Problems that are typically covered by a policy include fire, hail, theft and vandalism.
Business interruption insurance
Also known as business income insurance, this pays for extra expenses if problems covered by the policy, like theft or fire, cause you to temporarily close or relocate. It can also help replace lost business income.
Commercial auto insurance
This covers vehicles used for business, such as driving to client meetings and job sites or picking up work-related supplies. A personal auto policy typically won't cover auto accidents while working.
Equipment breakdown insurance
If your business relies on key pieces of equipment, like computers or power tools, this helps cover the cost to replace or repair broken equipment. It can also help replace lost income if business was affected.
Professional liability insurance
This covers you against lawsuits that you didn't provide a promised or expected service. For example, a client might claim your bad advice led to financial harm or that your completed job did not meet their expectations. Also known as errors and omissions insurance, coverage typically includes the cost of a legal defense, judgments and settlements, even if the claim is groundless.
Workers compensation
If an employee gets sick or hurt while performing work-related tasks, this covers medical bills and some lost income with disability payments.