Whether you’re starting a home business due to financial needs like a layoff or simply following your lifelong dream of becoming an entrepreneur, you never want to be without the right insurance protection. Some home business owners may assume that their home insurance will provide the necessary protection in the event of a loss. But that’s often not the case, so it’s important to know what type of insurance you’ll likely need to purchase to protect your new business. A regular homeowners insurance policy does not extend coverage to your business, according to the US Small Business Administration (SBA)*. Your homeowners insurance policy’s personal belongings coverage may not cover any of your business equipment, or the coverage limits (the maximum amount your insurer will pay in case of loss) may not be high enough to cover the expenses related to your business.
Your business faces many other risks that may not be covered by your homeowners insurance policy, such as liability. For example, suppose a client visits your home to discuss a business proposal. The client walks out of your office and trips over an extension cord and breaks his leg. Your policy may not cover you in that situation. Also, a homeowners insurance policy usually doesn’t protect against losses such as information stolen from computers, accidental copyright infringement, or an injury to one of your employees.
There are two ways in which you can deal with these potential gaps in insurance coverage. If your small business is in the start-up phase and you don’t have many visitors or employees, your insurer may offer an endorsement to your homeowners insurance policy that provides additional coverage to help protect you in the event of a small business loss. However, here are some business insurance coverages you might want to consider.
COMMON COVERAGE IN BUSINESS INSURANCE
A business insurance policy can help protect you against many of the common threats home-based business owners face. Here are some of the coverages that could help your home business:
- Business Property Coverage: This coverage can help protect items such as computers, signs, merchandise, and other business-related property from certain causes of loss, depending on your policy.
- General liability coverage: This type of coverage can help protect you in the event someone sues your business due to an accident, injury, or negligence claim, says the SBA .
- Compromised data coverage: Hackers are increasingly targeting small businesses * and such attacks can result in customer or employee information being stolen from company computers. This type of coverage can help you recover from this situation.
- Labor Practices Liability Coverage: When you hire even just one employee, this type of coverage may be a good idea, should you ever face allegations of wrongful termination or other occupational hazards.
- Business Interruption Coverage – This provides business income, should operations be interrupted by a covered loss, such as a fire or tornado.
There are also other types of coverage , including equipment breakdown coverage and business auto coverage, that you might consider to help protect your home-based business. Talk to your commercial insurance agent for more information.