Home Based Business Insurance: Why it Pays to Be Insured

A home-based business has the same framework as a larger business.  And like all other businesses (corporations, partnerships or single proprietorships) has the same concerns.  All the business processes are represented on a smaller scale.  The concerns include liabilities, unforeseen events and possible business interruptions.  And if the home owner’s income is dependent on successfully running the home-based business, it is important not to overlook insurance needs and requirements.

The common misconception is that the home insurance is sufficient to cover the home-based business.  On the contrary, the home insurance coverage does not include the home-based business.  Among the concerns would be coverage for employees, office equipment, inventory, vehicles, and disasters.  The home owner should treat the home business insurance as if the business was not at home.

The home office insurance is different from home insurance.  If a guest or relative gets injured at the front door, this is covered by the home insurance.  However, a separate general liability insurance should cover for injuries to clients, employees, delivery personnel or other business-related personnel while at the work place.

Using the personal vehicle for commercial purposes needs additional insurance coverage separate from the standard car insurance.  In the case of the personal car, there is generally an exclusion for business-related liability. If the business requires lots of business travel or deliveries using the family car, it is important to make sure that there is adequate home business auto-liability insurance coverage.

If the home based business has any employees besides the owner, workers’ compensation insurance is a must.  Workers’ compensation insurance covers work-related injuries, or injuries incurred at the workplace.  It also covers medical coverage and lost time compensation as well as death benefits for the surviving spouse and dependents. This is bought as a separate policy.  The workers’ compensation insurance requirement varies between states.

Business property insurance should also be separate from the home insurance coverage. The computer, printer and other office equipment used in the home business is tagged as an exclusion to the home insurance coverage.  Though it can be a rider to the home insurance coverage, it is better to have a separate business property insurance for the office equipment.  Same goes for the inventory.  There should also be adequate insurance to cover inventory stored in the home.

Property insurance normally does not include flood or earthquake insurance.  If the residence is in a flood-prone area it would be a good idea to add coverage for floods.  Home based business in an earthquake prone area should also look at earthquake coverage or policy riders.  This is usually not included in regular home or property insurance coverage.

Other insurance coverage the home based business needs to look into are business interruption insurance, professional liability insurance or malpractice insurance, product liability insurance and completed operations insurance.

When a fire occurs and the home based business could not operate, the business interruption insurance covers the continuing costs and expenses of operations.  This includes potential income loss, workers income and utility bills.

Professional liability insurance protects the home based business against financial losses due to lawsuits for any harm or damage they may cause another person or business in the performance of their job.

Product liability insurance is coverage against lawsuits brought against non-performing products.  Completed operations insurance is a form of liability insurance which covers injuries to persons or damage to property after the delivery of a contract and attributed to the completed operation.

Insurance coverage for the home based business is no different from coverage for a regular business.  It is important to remember that the home or personal owned equipment may be used for the home-based business but has to be treated separate for insurance coverage purposes.


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