Don’t Be Left Holding the Bill with Your Business

If you are thinking of starting a home-based business, be sure that insurance is a high priority for you.

A home business can be a great venture, but one can also be left with quite a mess in the event the business is hit with a natural disaster, theft or lawsuit from a customer injured on the property.

According to numbers from the Bureau of Labor Statistics, 22 million Americans completed some work at home on an average day in 2008, an increase from 18 million in 2003, possibly showing increased telecommuting along with job losses in the private sector.

Keeping that information in mind, it is unclear the number of people who are working from home have established home-based businesses; however the number of self-employed grew from 8.5 million in January 2009 to 9.0 million by the end of the year.

A typical misconception is that homeowners’ insurance policies provide broad coverage for a home-based business, but in fact they usually offer no more than $2,500 to replace damaged or stolen business equipment.

It is also important to note that standard homeowners’ insurance policies offer neither business liability nor business income coverage for home-based businesses. These are important means of protection in the event an employee or customer is injured on the grounds, or a loss prompts the extended closing of a home-based operation.

Depending on what type of home-based business it is, a separate professional liability policy may also be needed.

Professional liability policies offer protection against financial setbacks derived from lawsuits filed against business owners by their clients. In the event liability is limited to acts of negligence, the professional liability policy is known as an errors and omissions policy.

The Independent Insurance Agents & Brokers of America (IIABA) commissioned a study in 2004 which discovered approximately 40 percent of home-based business owners had not acquired insurance due to the fact they thought they were protected by some other form of coverage.

Meantime, 30 percent indicated their businesses were too small to insure, while 20 percent did not offer a reason for not being covered.

Keep in mind that insurers differ considerably with the types of business coverages they will offer consumers. A number of them may meet the specific needs of one’s business, while others may not. It is best to shop around for multiple quotes in order to get competitive pricing.

There are three typical choices for you to look at when getting insurance for your home-based business.

A homeowners’ policy endorsement is where you may be able to add a simple endorsement or ride to your present homeowners’ policy that doubles the $2,500 standard coverage for business equipment like computers. With an additional premium charge, you can increase the policy limits for losses related to a home business to $5,000 or $10,000.

With an in-home business policy, you have additional comprehensive coverage for business equipment and liability than a homeowners’ policy endorsement. The typical home-business insurance policy can range anywhere from $250 to $500.

Most policies reimburse you for the loss of important papers and records, accounts receivable and off-site business property. A number of them will compensate you for the income lost in the event the home is badly damaged by a fire or other disaster that it cannot be used for a period of time. Other insurers will also compensate for the additional expense of operating out of a temporary locale.

Another benefit to insurance for your business property is that the majority of policies will reimburse you for the loss of important papers and records, accounts receivable and off-site business property.

In-home business policies are available from homeowners’ insurers, which make available business insurance tied in with a standard homeowners’ policy. Stand-alone in-home business policies are also sold by a number of specialty insurers. If that is the case, you are not required to also purchase your homeowners’ insurance from the insurer.

Finally, there is the option of a business owners policy (BOP), which is one of a number of package policies slated to meet the insurance needs of different kinds of businesses.

BOP eligibility will be determined by whether or not the business owner meets certain criteria, including size of the premises, the limits of liability required, the type of commercial operation it is, and the extend of the off-premises servicing and processing activities.

It’s important to note that a BOP does not include workers’ compensation, health or disability insurance.

In the event you have employees, you will be required to obtain separate policies for these coverages.