Working from home has become increasingly popular over the past few years. In fact, a study showed that 3.6 million U.S. employees now work from home at least half the time. While the flexibility and comfort of working in your pajamas certainly has its perks, operating a home-based business does come with some risks. So, how can you protect your business assets and mitigate liability if you work from home? The answer lies in securing the right insurance coverage.
In this comprehensive guide, we’ll walk through the key types of business insurance needed for those working from a home office. We’ll also explore important factors to consider and provide tips for customizing your policy. Read on to gain peace of mind knowing your home business is fully protected.
Understanding Working From Home and Insurance Basics
Before we dive into the details, let’s quickly go over some home business insurance fundamentals.
First off, what exactly constitutes "working from home"? The IRS defines it as operating your business out of your personal residence for the sake of convenience. This can apply whether you work from home full or part-time.
Common home businesses include consultants, web developers, accountants, writers, virtual assistants, and crafters selling wares on Etsy. However, any business can potentially be run from home with the right model.
Now when it comes to insurance, you’ll generally need both home and business coverage. Your homeowners or renters insurance will provide basic protection for your dwelling itself. Business insurance then covers liabilities related to your commercial activities.
While standard home policies may offer a small amount of coverage for home offices, it’s rarely enough. Specialized small business policies are usually required to fully protect home entrepreneurs.
Conducting a Thorough Needs Assessment
In determining what business insurance you need, the first step is thoroughly analyzing your risk exposures. This involves taking a close look at potential liabilities, asset vulnerabilities, employees, and legal obligations.
On the liability front, think through what accidents or incidents could happen relating to your business activities or clients visiting your home. For example, a client falls down your stairs or gets sick from samples you provide. Professional service providers also face liability risks like failing to meet a deadline or providing negligent advice.
Next, take stock of key business assets housed in your home. This includes equipment like computers, inventory and materials, furniture, data, intellectual property, and money. Consider the costs to repair or replace these items if they were damaged, stolen, or lost.
If you have employees that either work from your home or remote locations, you’ll absolutely need workers' compensation and perhaps employers' liability. This protects staff in the event of on-the-job injuries or illnesses.
Finally, research what business insurance types and levels of coverage are legally required in your state or locality. Failing to carry mandated policies can result in serious fines or inability to operate.
Taking the time to thoroughly assess these elements will ensure you pursue the optimal insurance mix.
Must-Have Insurance for Home Businesses
After evaluating your unique risks, you can zero in on the most essential policy types for working from home. Here are four that no home business should operate without:
Home-Based Business Insurance
This specialized policy enhances your homeowners coverage to fully protect home business activities. It commonly includes general liability to cover third-party property damage or bodily injury claims. Other features are business property coverage, loss of income, tools/equipment protection, and liability arising from people visiting your home office.
This flexible policy can often be customized with add-ons like professional liability, cyber coverage, employment practice liability, and more. Just be sure to disclose all your business operations to your insurer.
Public Liability Insurance
Known as commercial general liability insurance (CGL), this is a must for almost any business. It covers claims of property damage, personal injury, advertising injury, and more that may occur because of your operations. Home businesses should carry at least $1 million in coverage.
For service professionals, professional liability insurance should also be considered. This covers errors & omissions that could lead to financial harm to a client, like incorrect advice or missed deadlines.
Employer’s Liability Insurance
If your home business has employees, this policy provides vital protection. It covers compensation and legal defense costs if an employee is injured or becomes ill due to work. Most states require all employers to carry this at a minimum level. Though even then, higher limits are recommended for adequate protection.
Contents Insurance
A standard home policy may cover items like computer equipment used for business in the home. However, limits are often inadequate for home business needs. Purchasing special contents coverage for your home office provides higher protection for key assets like equipment, furniture, supplies, inventory, and important data/files.
Key Considerations When Shopping for Coverage
Once you’ve determined the essential policy types your home business requires, here are some other important factors to keep in mind:
Inform your insurer - Disclose all details of your home business operations so appropriate coverage can be issued. Failing to do so could void your policy.
Review exclusions - Look for any exclusions that would leave key risks unprotected. Common examples are professional services, hazardous materials, use of autos or aircraft, cyber incidents, etc.
Consider costs - Weigh premium costs against the level of protection provided. Higher deductibles and limits can reduce premiums. But also consider the out-of-pocket costs you could incur under different scenarios.
Evaluate adequacy - Do some research to determine appropriate coverage levels for your particular business. Factors like industry, size, assets, and local regulations will impact this.
Look into discounts - Many insurers offer discounts for things like multiple policies, protective devices, and claims-free history. Bundling home and business policies with one company can net substantial savings.
Shop around - Don’t just automatically go with the incumbent. Get quotes from several insurers for the best rates and terms. An independent agent can be helpful here.
Review regularly - Re-evaluate your policy at least annually as your business changes. Report any changes in operations, employees, assets, revenue, etc.
Gain Complete Peace of Mind
Operating a business from the comfort of home has fantastic advantages. But make sure to protect your enterprise fully by securing tailored insurance coverage. Conduct a thorough risk assessment, secure essential policies like liability and property insurance, and customize according to your specific needs.
Implementing the proper home business insurance plan allows you to operate with complete confidence. You’ll have assurance that your hard-earned assets are protected and any liabilities that arise can be handled.
So don’t leave anything to chance. Consult with a qualified agent to craft a rock-solid insurance portfolio for your home-based business. With the right coverage in place, you can focus on doing what you love!