Home-Based Business Insurance

Across America, millions of people are enjoying the earning potential that can come from having a home-based business. For many, home-based businesses are ideal because they can provide the flexibility to work around family schedules and skip the commute. Whatever your story, you may want to strongly consider a home-based business insurance policy to protect your commercial property, liability exposures, and other potential threats.

Fortunately, an independent insurance agent can help you find the right kind of coverage for your home-based business. They'll get you matched to a policy that provides just the right amount of protection for your unique enterprise. But first, here's a closer look at home business insurance, what it covers, and why it's necessary.

What Is Home-Based Business Insurance?

Home-based business insurance is a type of business insurance designed to meet the needs of business owners and workers who work from home. Since your business is in your home, it may be tempting to think that your homeowners insurance covers your business, but unfortunately, it doesn’t.

In fact, homeowners insurance specifically excludes business activities and most business property, meaning you won’t have liability coverage for your business, and you’ll only have very limited coverage for your business contents.

Even worse, operating a business out of your home without the proper insurance could potentially void your homeowners insurance if you file a claim. For example, if you’re working from home and a fire starts, it may be difficult to prove that the fire didn’t start as a result of business-related activities, which would mean the insurance company could fight the claim and not pay it.

Professionals Who Need Home-Based Business Insurance

Many types of professionals could benefit from having home business insurance. If you primarily work from home as any of the following, you might want to consider getting coverage:

Web designer
Accountant
Tax preparer

Even if your home business doesn't fall into one of these categories, you may still need additional coverage beyond what's provided by your home insurance policy. An independent insurance agent can help you determine your specific coverage needs.

What Does Home-Based Business Insurance Cover?

Your home business may need several types of coverage to be adequately protected. Home-based business insurance could apply to the following types of business or commercial insurance policies:

General liability insurance: This business liability insurance gives you broad coverage for lawsuits, legal fees, and settlements if a third party sues you for bodily injury or personal property damage.
Business property insurance: Most home insurance policies limit coverage for business property to about $2,500, so having additional coverage can help protect your business equipment and other property against losses due to fire damage, theft, and more.
Business owners policy (BOP): The most comprehensive small business insurance policy for small companies, a BOP can provide contents coverage, business interruption coverage, and general liability insurance in one convenient package.
Professional liability insurance: Also known as errors & omissions (E&O), if you operate a service-based or advice-based business, such as hairstylists, realtors, financial advisors, insurance agents, or health practitioners, this can cover you for malpractice, negligence, and lawsuits arising from third-party claims of improper or inadequate advice or services rendered.
Commercial auto insurance: If you’re using your vehicle for business purposes, make sure you at least have “business use” listed on your personal auto insurance policy. However, if the business owns your vehicle, you’ll need commercial auto insurance.
Workers' compensation insurance: This coverage can reimburse employees for lost wages and medical expenses due to work-related injuries or illnesses.
Business interruption insurance: This can provide a continuation of operating expenses and employee wages during covered temporary business closures due to a number of perils, such as fire damage.
Cyber liability insurance: This can cover costs related to data breaches and cyber-attacks that may expose, distribute, or sell private and sensitive data, such as employee records or customer credit card numbers.

An independent insurance agent can help you build a complete home-based business insurance package designed to protect your unique company.

Why Do I Need Home-Based Business Insurance Coverage?

There are a number of circumstances in which a home-based business insurance policy could save you from financial loss. Risks vary by industry, but consider the following scenarios:

If you keep a lot of inventory in your home and it’s damaged in a fire or stolen during a burglary, you could end up losing thousands of dollars.
If the work you do creates an error that leads to financial losses or embarrassment for a client, you could get sued.
If you sell products and someone becomes ill or injured as a result of using them, you could be sued for medical costs.
If you travel to your clients’ property to work, such as with a lawn care or home organization business, and you accidentally damage property there, you could be sued.
If a customer comes to visit your home business and gets injured on the premises, you could be responsible for their injuries or the costs of a resulting lawsuit.
If your business's advertisements cause harm to another individual or a third party claims copyright infringement by your company, you could face an expensive lawsuit.

Many potential scenarios could lead to financial losses for your home business if it lacks the proper protection. An independent insurance agent can help you address these risks and others you may not have considered.

Home Insurance for Home-Based Business

Depending on the nature and scale of your home-based business, you may be able to endorse or modify your current homeowners insurance policy to give you broader coverage for your business.

Most standard homeowners insurance policies have a limit of about $2,500 on business-specific personal contents. You can likely increase this amount, although you may not be able to go above $10,000 in business contents coverage. If your business property is worth more than that, you’ll probably need a BOP.

Depending on the nature of your business, you may also be able to add a business liability endorsement to your homeowners insurance policy. Most homeowners insurance programs are only comfortable doing this for low-risk businesses, such as music teachers or financial consultants.

Combining a business liability endorsement with increased business contents coverage should give you most of the coverage you need to run your home-based business. But those coverage options will only apply to business activities in your home, so if you take your business off-site, you won’t have coverage on your homeowners policy and will need to buy business insurance.

How to Cover Your Home-Based Business

Understanding that your home insurance policy won't fully protect most home-based businesses is critical. Fortunately, you have a few options to protect your home business properly. Because there are so many types of home-based businesses, the protection you need can come from a number of different policies, including:

Homeowners or renters insurance: For some smaller home businesses, simply purchasing an addendum or endorsement to your home or renters insurance policy will meet your coverage needs. This is perfect for home businesses that don’t have a lot of expensive merchandise or equipment to insure. Often available for less than $20 a month, coverage can insure about $2,500 in additional business equipment. However, this coverage doesn't protect you from liability claims.
A home business insurance policy: These policies are great for medium-sized businesses with assets between $2,500 and $10,000 and those at risk of third-party lawsuits due to injuries, property damage, or poor work quality. This type of policy is also typically inexpensive and can provide up to $10,000 in property coverage and $1 million in liability coverage.
A commercial insurance policy: This type of policy is meant for larger home-based businesses that have a ton of assets and require extra coverage. Policies generally offer several types of liability coverage and can cover some professional exposures, as well as millions of dollars worth of business property. Premiums can vary widely from modest amounts to large sums depending on your business and revenue.

Most home-based businesses can be fully covered with one of these coverage options. If you’re unsure where your business falls, an independent insurance agent can help you work it out.

Home-Based Business Health Insurance

As the owner of a home-based business, you’ll likely need to find your own health insurance plan. Fortunately, there are a few different options available to you:

SHOP plan: The Small Business Health Options Program, or SHOP, is a government-run health insurance program designed to help small businesses. If you qualify for a SHOP plan, you may be eligible for up to a 50% tax credit through the Small Business Health Care Tax Credit.
Join an existing group insurance plan: Your local chamber of commerce, university alumni, or various trade associations may have a group health insurance plan that you can join. You’ll have to do some research and ask around, but it may pay off.
Buy your own group insurance plan: If you have at least one employee, you may be able to buy your own group health insurance, which could cover you and your employees.
Buy your own private insurance plan: You could also buy a private health insurance plan and apply through the marketplace, where you may be eligible for tax credits and lower premiums.
Start a Health Savings Account: An HSA is a popular health insurance plan that allows you to contribute pre-tax dollars into an account that grows with interest. If you use your HSA money for medical expenses, you can take it out tax-free. You’ll need to enroll in a high-deductible health insurance plan to qualify for an HSA.

Consider your options carefully when determining which type of home-business health insurance is right for you and your family.

How Much Does Home-Based Business Insurance Cost?

Home-based business insurance premiums can vary widely depending on the type of business you run and other factors. However, smaller home businesses that only need general liability coverage can pay just $11 per month. Small home-based businesses can also typically find professional liability coverage for as low as $19 per month.

Larger home businesses, on the other hand, tend to need much more coverage, such as workers' compensation and greater amounts of commercial property insurance and might pay hundreds of dollars or more per month. The cost of your coverage can depend on the following:

Type of business
Business location
Types of coverage and policy limits

Value of business property
Prior claims history
Deductibles

A local independent insurance agent can help you find affordable home-based business insurance near you.

An Independent Insurance Agent Can Help You Find Home Business Insurance

Independent insurance agents are free to shop and compare quotes from multiple insurance companies so they can find you the best deal available. These agents know which carriers specialize in home-based business insurance and will deliver on claims if the time comes. And down the road, your agent can help you file business insurance claims and update your coverage as necessary.

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