Do you operate a home-based business? Thinking about starting one? You’re in good company. According to statistics from the Small Business Administration (SBA), roughly 50 percent of small businesses are home-based businesses. And this sector just keeps growing.
It’s easy to see why – more freedom, more flexibility, more control and greater earning potential for starters. And from the Internet to social media to artificial intelligence (AI)-based marketing tools, technology continues to make it easier than ever for home businesses to compete with much larger businesses in the marketplace.
But all the technology in the world won’t change one reality: your need for financial protection.
A potentially devastating gamble
Millions of people operate a home business and flirt with disaster every day. How? By assuming their homeowner’s insurance policy will cover their home-based business activities. It’s a mistake that could end up costing them everything. Homeowner’s and renters’ insurance policies generally provide little, if any, coverage for home-based business activities. In fact, your home business activities can actually void your homeowner’s insurance policy.
Stack the deck in your favor
So many things can go wrong when running a home business. A client or delivery person could fall and get injured on your property, or your product could harm a customer. A lawsuit could take everything you have, even your personal property. That’s why you need protection.
There are basically three ways to get coverage:
- Homeowners policy endorsement. A simple endorsement or rider added to your homeowners policy can increase your coverage for equipment and liability.
- In-home business policy. This policy provides more comprehensive coverage than a homeowners endorsement, including for the loss of important papers and records, accounts receivable and off-site business property. It can also include business interruption coverage.
- Business owners policy (BOP). Specifically for small and mid-size businesses, a BOP is smart if your business has multiple locations. Like an in-home business policy, a BOP covers business property and equipment, loss of income, extra expense and liability, but on a much broader scale.
What specific coverage do you need?
That depends. Are you a freelance photographer? Do you make and sell food or personal care products? Do you deliver goods with a company vehicle? There are many things to consider and your specific business will dictate what type of coverage you need, but here are some of the most common:
- General liability protects you from injuries to clients on your business property and elsewhere.
- Business property can cover the cost to replace business equipment, which likely isn’t covered under your homeowner’s policy.
- Business auto. If you use your vehicle for business purposes, you need to properly insure it to cover any damages or liability to others in the event of an accident. Your personal auto coverage won’t protect you.
- Product liability. If you sell a product, you should consider this coverage to protect you from liability resulting from the product's nonperformance.
- Professional liability. If you provide professional services, this coverage helps protect your personal assets if a client sues you for alleged damages due to your actions professionally.
- Business interruption can cover your lost revenue if you have to temporarily shut down due to fire, flood or other disaster.
These are the basics and your business may require other types of coverage. Just remember – when it comes to insuring your home business, it’s not the amount of your sales that matters. It’s the amount of the loss you could face if something goes wrong.
Don’t leave financial protection for your home-based business to chance. Contact Higginbotham Insurance. We’ll help you figure out which coverage is right for your business.