About 46 percent of self-employed workers conduct their business from home, according to the U.S. Bureau of Labor Statistics. If you have a home-based business, you have special insurance needs.
The broader availability of wide-band or wireless Internet access and faster, cheaper computers have made working at home an increasingly viable possibility for millions of entrepreneurs. And unlike many home-based businesses of the past, which tended to be small, part-time operations, some of today’s home-based businesses are thriving, multi-million dollar operations.
So, if you are considering going out on your own, check your insurance coverage before beginning a home-based venture. Your homeowners policy probably does not cover losses to computers and other business-related equipment or records, nor will it pay for lost income and “extra expenses,” as a business property policy can.
Relying on your homeowners insurance can leave you with big gaps in your liability coverage, too. Most homeowners policies exclude liability coverage for “business pursuits.”
Your Insurance Options
Adding an endorsement to your homeowners policy: The endorsement HO 04 42, “permitted incidental occupancies,” extends your policy to include certain types of businesses. It also increases the limit on furnishings, supplies and equipment from $2,500 to whatever your policy’s Coverage C limit is. However, it won’t cover liability claims that occur outside the home. Insurers also offer other endorsements, including coverages for those who run home day care centers and for businesses that gross less than $5,000 per year. If you are a salesperson, professional or skilled tradesman, your business might require insurance beyond what’s available in a homeowners policy.
Buying separate business policies for all your business insurance needs: You can also cover your home-based business by buying separate policies for specific coverage. Insurers can provide a choice of property, general liability and business income policies, so you can select the individual coverage(s) you need. One example would be a separate policy for your computer. Depending on the policy, you could get your computer replaced for whatever it’s worth at the time of loss.
Buying a “package” policy
Another option is a “package” policy, which combines liability and property coverages. Make sure, though, that the package doesn’t give you “coverage overkill”—more coverage than you really need at more than you need to pay. Today, insurers offer “entrepreneur” packages designed specifically for small, home-based business enterprises.
Workers’ compensation coverage
Most states require workers’ compensation for all employees, but make it elective for sole proprietors, partners, employed spouses or certain classes of corporate officers. If you employ anyone, even on an independent contractor basis, you could have workers’ compensation exposures if that contractor becomes injured and claims he or she should have been classified as an employee. A minimum premium policy can give you protection and peace of mind—please call us for more information.
No matter what type of home-based business you have, we can meet your insurance coverage needs. Please call our office for more information.
Home Business Requirements
Get your home-based business off to the right start! If you’re just starting a home-based business, you’ll want to check the following:
- Local zoning requirements. Many towns or cities restrict the use of residences for business use by putting restrictions or limitations on traffic, parking, signage, number of employees, retail sales or hours, or storage of materials.
- Employer ID number requirements. Does your business need a federal tax identification number? Check the Internal Revenue Service’s Web site to see.
- Business licenses. Most states and some cities require businesses to obtain a license. See the Small Business Administration’s site, for a list of some of the licensing requirements that might apply to your business.