Today, millions of people work from home and almost all of them love doing so. After all, you are getting to work from the comforts of your home. What is there to not like about this arrangement?
Now, let us present an interesting idea. If you can work from home, you can also run a business from home, right?
Right now, almost 14 percent of the American workforce is working from the comforts of their respective homes. At the same time, around 19 million home-based businesses are currently operating in the US.
Running a business out of your home can be exciting, liberating and a lot more comfortable than the traditional office route. However, there is one thing that many home-based business owners often end up overlooking – the matter of insurance.
Home-based businesses do not always need a one-size-fits-all insurance policy. In fact, they rarely do. What you need depends entirely on what you do, how you do it and what risks are involved. That is why, before you sign up for any kind of coverage, you should ask the right questions.
Asking the following questions will help you figure out exactly how you can protect your home-based business through the right insurance policy.
1) Can My Homeowners Insurance Cover My Home-Based Business?
Most people assume that their homeowner’s policy has them fully covered just because their business lives under the same roof. But in most cases, this is not how insurance is supposed to work.
A standard homeowners insurance policy usually includes very limited business-related coverage if any at all. Some policies might cover a laptop or a few hundred dollars of business equipment, but anything more than that? You are probably not covered.
You will need to check whether your homeowner’s insurance provides any protection. And if it does not or if the limits are too low, you will have to explore additional coverage.
2) Will My Premium Go Up If I Add Business Coverage?
If you are running a home-based business, you run the risk of raising your premium. This raise will go directly into covering things like inventory, equipment and supplies.
In New York, for instance, business activities inside the house might add risks that standard homeowners insurance usually does not cover. Now, home insurance in New York will cost you around $1,740 per year on average. As the premium goes up for your home business, so will this average cost. Hence, with your standard homeowners insurance, New York might be a bit too expensive for your home-based business.
However, it is not always as expensive as you think, especially if your business is relatively low-risk. Your insurer will look at a few things when determining the new rate. These include what kind of business you are running, how much business equipment you own, whether customers come to your house, etc.
Such factors influence your home insurance coverage and they can shift the way your homeowner’s coverage is calculated. It is important to have a conversation with your provider so you are not caught off guard by a surprise bill.
Remember, skimping on the right protection now could cost a lot more later. If you are unclear, push your insurance agent for examples and real-world scenarios. Make sure you understand exactly how your premiums are affected and what kind of claims your policy will and will not cover.
3) Should I Get a Business Endorsement or a Separate Policy?
Once you find out your homeowner’s policy falls short, your next move is figuring out how to fill the gap.
Depending on the size and nature of your business, you might just need a simple business endorsement tacked onto your homeowner’s insurance. This is usually the more affordable route and it might give you the extra protection you need.
But if your business has grown beyond a few side gigs a month, you are probably generating a steady income. If so, it is probably time to look into a separate business insurance policy altogether.
A standalone policy will offer broader protection and higher coverage limits, which becomes essential as your risk exposure increases.
4) What Kind of Risks Am I Actually Insuring Against?
Do you meet clients at home? That opens up liability issues. Are you shipping products? Then there is a risk of damaged goods or delayed deliveries. Do you store inventory? Think fire, theft or water damage.
Different businesses come with different sets of risks. A freelance writer needs protection for their equipment and data loss. A home bakery might need liability insurance and coverage for spoiled goods.
Get clear on what could go wrong in your day-to-day operations and make sure your policy is tailored to those concerns. A generic plan might leave you exposed when you least expect it.
5) What Happens If I Hire Employees or Contractors?
At some point, your business might grow to the point where you are no longer doing it all yourself. Maybe you bring on a virtual assistant or a part-time helper to handle shipping. Great for productivity, but it changes your insurance situation too.
Bringing on help could trigger new requirements, especially if someone is physically working in your home. Depending on where you live and how your business is structured, you might need workers’ compensation insurance or additional liability protection.
Do not assume you are covered just because they are part-time or independent contractors. The lines get blurry fast. If someone gets injured or sues you for something related to their work, you will want to make sure your policy can handle it.
It is easy to get wrapped up in the creative and exciting side of running your home-based business. Insurance, admittedly, is not the most fun topic here. But it is absolutely essential. All it takes is one mishap for your entire business to take a hit.
Asking these few questions is all about understanding your actual risks and making sure your business (and your home) are fully protected. So before you go another day just assuming you are covered, have the conversation. After all, your home-based business deserves the same level of care as your home.
