Insuring a Home Business

Summary: Even if a business is operated at home, its properties and owner still faces the same risk of damage from calamities, theft or lawsuits by clients. How can you protect your home business from such eventualities?

Read from our guide the basics of managing risks to a home-based business.

Why Home Business Insurance is Important

A conscientious business owner would usually put in place some form of risk management plan for his business. That includes purchasing the necessary insurance for his business properties, his profession, his employees like health, life and disability insurance. It is easier to think in that line if one is running a regular business. But for those running a home based business, that risk management planning could sometimes take a back seat, especially if the business is just starting and finances are tight. There’s also a temptation to think that one’s home insurance already covers the equipment, computer, fax machines that one uses to operate the business.

But usually, renters and homeowners' policies exclude home businesses. What more, operating a business inside one’s home could violate some terms of a homeowner’s policy. And so while skipping on insurance for a home business could be cost-saving in the short-term, it might prove otherwise in the long term. Disaster could strike anytime and damage equipment necessary for business. Or a client is injured while at a visit at home office and there are medical bills to pay.

Buying Insurance for Home Business

Operating a home business is not so much unlike operating a regular business. That’s why the considerations in buying insurance are in most ways similar for both. The key is to be insured just enough so that no money is wasted on otherwise unnecessary expenses. When choosing insurance, it is also important to scrutinize the nature business to know what it really needs to avoid the other extreme of being under insured. For example, while any business could be protected against damages to third parties by a general liability insurance, a business in the service or manufacturing business would be better protected by more specific types of liability insurance – the professional liability insurance and the product liability insurance.

Here are some types of insurance that a business owner might consider getting:

• Property Insurance – ensures that the business gets compensation for the damage or loss of business property through calamities or theft. There is a basic property insurance coverage and there are specialized insurance for specific disasters.
• Liability Insurance – insures the business owner against the cost of damages to third parties as a result of the operation of his business, including incidence of malpractice, negligence, or accidents that happen in his place of business.
• Commercial Auto Insurance – applicable if the business uses vehicle or vehicles to conduct its business. If the owner owns the vehicle and has personal auto insurance, commercial auto insurance may still be needed to insure against business-related accidents.
• Workers Compensation Insurance – mandatory for businesses with employees in most states.