If you run a home-based business, you may not have given much thought to an insurance policy. After all, you have homeowner's insurance, right? Actually, your homeowners insurance may not be offering you enough coverage, and it may make sense to consider small business liability insurance. If you're doing business from your home, you need to be very smart about insurance and insure your business as soon as possible. There are three main types of insurance policies you may consider based on the complexity and type of business you operate. Here's what you need to know.
Adding on to your homeowner's insurance
One option is an add-on or rider that simply expands your homeowner's policy to cover your business. This is usually pretty affordable but it typically offers just $2,500 of additional coverage. If you are a one-person business and you do not have a lot of valuable equipment or products or very many business visitors to your home, and you are unlikely to sustain a major loss if you cannot operate due to fire or a disaster, this option may work.
Accountants who just prepare tax returns at home and deliver via email would find this option the best, for example, but many home-based businesses will be seriously under-insured. If a UPS man gets hurt delivering something to your home business, you could end up on the hook for the medical bills, which shows why small business liability insurance is so important.
In-Home Business Policy
You may also opt for an in-home business policy which covers things like loss of important documents or theft of funds from your bank account. This policies are usually issued by specialty firms and the plan guards you against theft or injury and covers up to three employees. The plan will cover up to $10,000 in losses, and this is the minimum option most home-based businesses should consider.
Business Owner's Policy
The best option for the vast majority of home-based businesses is a comprehensive business owner's policy (BOP). This is for business owners who need over $10,000 in coverage and it's the type of policy used by retail businesses.
While it costs more, this type of insurance combines business general liability insurance, business property insurance with other forms of insurance to give you comprehensive coverage against accidents, injuries, loss of profits, loss of products or documents, fire damage, equipment breakdown, damaged goods and much more.
As your business grows, you may find that additional coverage is necessary that isn't provided by your business owner's policy. Still, most small businesses based at home find this business general liability insurance offers the protection they need with up to $2 million in coverage at an affordable cost.
