Insuring Your Home Business

Whether you’re working from home for an employer or running a business from your den, if you're involved in a commercial venture in the same place you live, you should look into some sort of business insurance policy to protect yourself and your business.

Many people believe that their homeowners insurance, because it protects against a wide range of perils, will cover business operations in their house. That’s false in most cases. In fact, running a business in your home can, in some cases, invalidate your policy. Most providers, when you apply for coverage, will ask outright whether you operate a day care on the premises, and if you do, you may not be eligible for coverage.

Depending on the language in the policy, homeowners insurance may cover a small portion of the equipment needed for your business. But it’s often not enough to reimburse you fully for your business equipment or supplies in the event of a loss from a covered event such as fire or burglary.

However, you do have options to make sure your commercial effort is protected from a number of types of perils, including some business-specific problems. You can in some circumstances extend the coverage in your homeowners policy, or you can purchase a separate business policy which can include additional coverages.

Here’s a look into the types of coverage available for home businesses:

Homeowners policy endorsement

This is likely the cheapest option, but coverage is limited. When running a small business from your home, you can buy an endorsement to go along with your homeowners insurance policy. Typical homeowners policies can include around $2,500 to repair or replace equipment such as computers.

Adding an endorsement can double this amount of coverage for just $25 to $50 per year, though this can vary by provider.

You could purchase other endorsements as well, including a liability endorsement. This option can help cover minor liability claims. However, it’s typically a realistic solution only for businesses with few in-home visitors or customers, and it may not provide adequate protection for many home operations. It’s important to discuss the various options with a licensed agent.

In-home business policy

An in-home business policy includes a greater amount of coverage for equipment and liability at a cost ranging from $250 to $500 per year.

Some in-home business policies can even reimburse you for situations in which you lose important records or accounts receivable to a covered peril. For example, if your computer crashes and you lose important data, an in-home business policy can cover having that data reconstructed. It also can provide some liability coverage for injuries that occur in the home.

One caveat: States have different regulations about the coverage that can be offered to in-home businesses, so it's important to speak with an agent familiar with the regulations.

Businessowners policy

This is a more comprehensive type of protection, covering equipment and liability as well as loss of income and extra expenses. For example, if your home is damaged by a fire, flood, or other disaster and you’re not able to operate your business, this policy can cover income lost during the interruption. It also can help cover extra expenses if you’re forced to conduct your business at an alternate location.

The liability coverage that accompanies a businessowners policy can protect the customers that come to your home as well as anyone that may suffer injury caused by the products or services your business offers.

Businessowners policies also can include auto insurance if your business requires a vehicle to properly operate.

The cost? It varies, according to the amount of coverage in a particular policy.

Commercial package policies

Commercial package policies are similar to the businessowners policy in terms of liability, equipment, loss of income and extra expenses coverage, but they go a step further and include workers’ compensation. If you have employees, you'll likely need this type of coverage. Again, premiums vary based on the level of coverage you want to purchase.

Keep in mind…

Providers don't all offer the same types of coverage within these categories, and even when they do, they often evaluate risk differently. That means protection and premiums can vary widely by carrier.

When you’re shopping around for coverage be sure that you’re comparing coverage as well as price. Discuss your business at length with a licensed agent to ensure that you’re not skimping on coverage.

Shannon Ireland writes for HomeInsurance.com, an online resource for homeowners and drivers across the country. Offering comparative automobile and home insurance quotes, consumers rely on HomeInsurance.com for the most competitive rates from the top-rated insurance carriers in the country. The HomeInsurance.com blog provides fresh tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.