Do you maintain a home office, work full-time from home, or operate a business out of your home? If so, your standard homeowners insurance policy may not cover several aspects of your home-based office or business. You need to have the proper insurance in place or your business could be financially responsible for damages to property, data losses, lawsuits resulting from injury and a myriad of other unforeseen potential damages.
What homeowners insurance won’t cover
Before you purchase supplemental insurance, review your homeowners insurance policy and find out whether there are business-related exclusions.
If you run a business out of your home, which insurers qualify based on regular foot traffic directly from your business and inventory being stored at the property, then you need to look outside of home insurance and obtain commercial property coverage.
If your home includes a more traditional office, you’ll find that homeowners insurance policies often provide limited coverage related to property and liability. And you may not have enough coverage to fully protect yourself which is why it’s a good idea to review and tailor your home policy to meet your needs annually.
Under homeowners insurance policies, some general exclusions for home-based offices include:
- No coverage for data loss
- Limited coverage for business equipment within your home (usually up to $2,500) and away from your property
- No coverage for business records
- No coverage for loss of income if your home is damaged and you can’t run your business
- No coverage for employers injured in your home or on your property
Before you have a chat with your insurance company about insuring your home office or home-based business, be prepared to answer the following questions:
- Do you intend to have employees?
- Do you hold meetings or conduct business within your home or at client offices?
- Do clients come to your home to conduct business?
- Are vehicles or equipment used for your business typically stored at your home?
- How much would it cost to replace your business properties?
- If your property (such as your home) is damaged, could your business operations be temporarily shut down?
- Who owns the vehicle you use for business purposes?
- Is there another source of income you can turn to if you’re injured and you suddenly can’t work?
- Is there any chance that a customer could sue you?
More than two-thirds of businesses in the United States start at home, according to a recent Global Entrepreneurship Monitor report. And 59% of established business owners continue to operate from home. So, insuring your home… Click To Tweet
More than two-thirds of businesses in the United States start at home, according to a recent Global Entrepreneurship Monitor report. And 59% of established business owners continue to operate from home. Unfortunately, too many home-based business owners aren’t aware of gaps in their insurance coverage until it’s too late. You may not realize that your coverage isn’t sufficient until you’ve experienced some type of disaster (like a hurricane) or you’ve been slapped with a lawsuit by a disgruntled employee.
If you aren’t building the next greatest software company in your garage, and just want to ensure that all the equipment and electronics you have in your office are covered, look specifically at your electronics coverage amounts. Most policies only include $2,000 of coverage, while modern home insurance groups like Hippo include a $8,000 minimum.
It may be hard to figure out what type of supplemental insurance coverage you need for your home-based business. Here are some options to consider:
Homeowners policy endorsement
An endorsement can be added to a homeowners insurance policy to increase coverage for business-related equipment and assets. You may also be able to pick up a liability endorsement in case someone is injured on your property.
Endorsements that expand the scope of coverage for business equipment can raise a $2,500 limit to $10,000 or more. An alternative is home business insurance that offers protection against crime and worker injuries.
Generally, liability endorsements are limited to businesses that have few visitors and clients. However, there are exceptions and endorsements may be provided to music teachers, for example, depending on how many students they have.
A businessowners policy (which is generally referred to as a BOP) provides coverage for small and mid-sized businesses. BOPs offer business owners broad coverage, including both general liability protection and property insurance in a single policy. Certain carriers provide BOPs specifically designed for home-based businesses.
Typically, BOPs include business interruption insurance, which reimburses business owners for up to a year following a fire or another serious incident. You could also ensure that your BOP offers additional coverage to address specific problems, like damaged or spoiled merchandise, technical or mechanical breakdowns or forgery. That’s one way to personalize your insurance policy to make sure that it meets your needs.
Separate business insurance policies
Instead of adding an endorsement to an existing policy or signing up for a businessowners package, you can purchase separate insurance policies depending on the kind of coverage you want to have. For example, you might purchase business income insurance (also known as business interruption insurance). You can also purchase general liability insurance to protect your business from third-party claims or lawsuits and gain access to coverage related to property damage and bodily injury.
A 2010 survey released by the Insurance Information Institute found that nearly 60% of all in-home business owners were not properly insured. Today, many homeowners who work from home still don’t have enough coverage. There is a common misconception among business owners that a homeowners insurance policy can and will protect home-base businesses from property or liability losses. In many instances, however, that’s not the case.
Still have questions about insuring your home office or home-based business? Contact a Hippo specialist. We’re here to help!