Running a business from the comfort of your home is incredibly convenient, but it also raises questions about insurance coverage. While homeowners’ insurance can offer some protection, it may not fully cover home-based business activities. Understanding the limitations of your policy and exploring additional coverage options to help protect your business from unexpected losses.
What Are the Limitations of Homeowners Insurance?
A homeowners’ insurance policy is primarily designed to protect your home and personal belongings, not any business assets. While it may provide limited coverage for business property, the amount may be significantly capped. In addition, most homeowners’ policies do not include liability protection for business-related accidents.
If a client or delivery person is injured on your property when you are conducting some facet of your business, it is likely that your homeowners’ insurance will refuse to cover the claim. This gap in coverage can leave you vulnerable to lawsuits and the risk of severe financial losses you will be forced to pay out of pocket.
When Is Additional Coverage Necessary?
If your home business stores inventory, sees clients regularly, or uses costly equipment, you may need additional insurance coverage. The following are some options to consider:
Home Business Endorsement
This add-on to a homeowner’s policy extends coverage for business-related property and liability. While it offers more protection than standard homeowners insurance, it still has limitations, particularly for larger operations.
In-Home Business Policy
Designed for more comprehensive protection, an in-home business policy covers business property, provides liability coverage, and protects against loss of income and data breaches. This type of policy may be ideal for a smaller home-based business with low risk, small-scale operations, and little inventory or foot traffic. It provides more comprehensive coverage than a homeowners policy endorsement.
Business Owner’s Policy (BOP)
A BOP bundles commercial property insurance, general liability insurance, and business interruption coverage into one cost-effective package. It is more comprehensive than an in-home business policy. This may be the right option for a small to medium-sized home-based business with higher risks, more equipment, or more client interaction. For larger operations or a highly specialized business, you may need commercial business insurance that includes custom options, such as professional liability, cyber liability, or workers’ compensation.
Is Liability a Major Concern?
Liability is one of the biggest risks for home-based business owners. If a person is injured while visiting your home for business purposes, your homeowners’ policy is unlikely to cover the medical costs or your legal fees. This risk is higher for businesses that host clients, such as consultants, tax preparers, and daycare service providers.
As a liability claim could lead to thousands of dollars in damages in addition to legal fees, it is important to secure adequate coverage. An endorsement on your homeowners policy or business liability insurance can help fill the gap to ensure you are protected from the financial fallout of an accident.
Protecting Your Business Investments
Beyond liability, consider what you have invested in business equipment. Computers, cameras, and specialized equipment are high-value items that are not likely to be covered under a standard homeowners policy. Take inventory of your business assets and meet with our experienced agents at LPL Risk Management. We can help you determine if your business should have higher levels of insurance protection. Give us a call today at (631) 676-7020.