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Home Business Insurance Considerations

Many of the companies that are now household names started as humble home businesses with big dreams. Famously, Apple started in a garage, as did Google and Amazon. The entrepreneurial spirit is still alive and well, but does your home insurance cover the activities related to your home business?

 
Your Business Equipment
Many times, business equipment for home businesses are the same items you might use for personal use. Your computer equipment is probably the best example because it often serves double-duty. Home insurance provides coverage for your computer and similar electronics, but usually not at full replacement cost and the coverage is subject to a deductible that can reduce a claim payout to a fraction of the replacement cost.
 
Specialised business equipment is less likely to be covered by a home insurance policy, meaning if your equipment is damaged, you might be on your own for the cost of repair or replacement.
 
A commercial property insurance policy can protect your equipment, furnishings, and even your inventory.

Your Business Liability 
For most home businesses, the biggest risk is the liability. Your home insurance policy provides coverage for liability — but only for personal liability. Business-related liability isn’t covered by a home policy.
 
Your home business has unique liability risks, even if the business is still in its early days.
 
Injury Liability: Businesses with clients that visit a home office (or a garage) have exposure to accidents. If a client trips or your latest invention falls over and injures your business visitor, you could be liable for costs associated with their injuries.
 
Product Liability: You can be liable for damages due to the products you sell or the services you provide. Even if you are just reselling something produced by someone else, there is a risk of a lawsuit, which can be expensive to defend.
 
Professional Liability: Many home businesses sell a service as opposed to products. Businesses that provide services — and specifically those that advise clients — can be at risk for professional liability. An error or a detail missed can create a lawsuit risk. A special type of policy covers these risks, often called errors and omissions insurance or professional liability insurance.
 
As with many types of lawsuits, you don’t necessarily have to do anything wrong to find yourself in court. A client’s perception of the situation may differ from yours and what you’ve documented, but you can still be sued and have to bear the expense of your defense. If the case doesn’t go your way, you could face a judgment that threatens your business and even your personal finances.
 
Fortunately, business insurance for small businesses tends to have lower premiums than for larger businesses because the business is still growing. This makes coverage more affordable, allowing you to protect your business even when cash flow isn’t exactly a river of revenue yet.
 
If you have a business you run from home or are thinking of starting one, discuss your business with your broker to determine which types of coverage you’ll need to keep yourself protected