You finally opened up your own business with a “storefront” at your home. By working from home, you’re likely saving money on gas and the cost of daycare if you have kids. You are also likely saving time due to your short commute from your bedroom to your workspace in the morning. But whether you’re a hairstylist or a hat-maker (or anything else, really), having a home-based business still means it’s a good idea to purchase business insurance. But why do you need business insurance when you’re already paying for a homeowner’s or renter’s insurance policy? Homeowner’s insurance is going to cover your business since it’s inside your residence, right? Not so fast. Here’s what you need to know about business insurance, why it’s important and what type of coverage is right for you.
Homeowners Insurance or Renter’s Insurance Alone May Not Cover You
Some homeowners insurance policies do cover in-home businesses, but most do not. Find out if your policy includes home businesses, or if your provider can add it to your policy.
Insurance for home items you use for business
Say you use Excel on your laptop to track expenses and payments. What if your laptop were to become stolen or damaged? If it was considered business property, your current policy may not cover the repair or replacement costs.
Covering medical expenses
Another example would be the guy who delivers materials for your products. If it’s mid-January and he slips on the ice in your driveway and falls, you may have to pay out-of-pocket for his injuries.
Disclosure is key
If you don’t disclose to your insurance provider that you’re running a business out of your home, they may not fully cover any damages since your policy was strictly residential. It’s better to prepare for all kinds of accidents by having insurance than to have one of these events happen unexpectedly and have to cover the expenses yourself, potentially setting you back thousands of dollars.
Your Type of Business Will Determine the Type of Insurance You Need
Insurance providers offer a variety of business insurance types. Your insurance will reflect the product or service you provide.
Property and casualty insurance are the types of insurance that protect from lost, stolen or damaged business property, such as the laptop scenario discussed above. But, there are many other types of insurance you need to explore for your business.
Liability insurance is something that any home business will need as it protects you during a negligence lawsuit. Many homeowners policies already have liability insurance in case someone gets hurt while visiting you, but this does not extend to business purposes. If you run a daycare center in your home, or you sell your products from your porch, you will want liability insurance in case a child or customer were to injure themselves on your property.
In addition, you will want your liability insurance to cover damages you may cause on others’ properties. Furthermore, “home-based” businesses that provide services outside their own homes need insurance as well. This type of job may include house-sitting, landscaping, carpet cleaning, or even remodeling.
If your business activities take place outside the home, you may also need professional liability insurance as your clients may be exposed to any dangerous chemicals or heavy, sharp or hot equipment you bring onto their property, or you may accidentally damage their property while on site.
Also, product liability insurance is necessary if you’re providing goods to customers – there is always the chance that your product could cause injury. If you make lotion and soap, it could cause a skin or eye reaction; or if you repair lawnmowers, the parts could malfunction and give your client a cut or burn. Always be prepared to cover customer injuries.
Commercial automobile insurance
This is a good type of insurance to have if you’re using your vehicle for business purposes. For example, if you get into a car accident while delivering your product to a customer, commercial auto insurance will cover you.
If you have employees, you may also want to extend your commercial auto insurance onto their vehicles when they are driving while working for you as your business may be liable for an accident involving an employee.
Another type of insurance for businesses with employees is workers’ compensation, which is actually required by most states. Unlike customers, employees cannot sue for getting hurt while on the job site – however, with workers’ comp, employers pay into a fund that covers the injured employee’s damages.
Bundling Policies Is A Great Value
One way that you can easily acquire business insurance is by bundling your business policy or policies with a homeowner’s policy. These policies tend to cover the property you use for both work and leisure, whether or not you’re actually at home. They also tend to cover the right liability insurance for you.
When you bundle these policies, it may cost you less than adding a rider to your existing home insurance policy to cover your business. But despite the potential savings, you need to make sure you’re getting what you pay for with the package. Make sure the coverage in your policy works for your type of business – you don’t want to be stuck with a policy that covers product liability when your business is a home office.
Insurance is essential for all businesses, even the ones you run out of your own home. Whether you’re providing goods or services, whether or not you have employees, and how often you have to travel or welcome customers into your home, business insurance has the potential to save you money in the long run should anything go worse than planned.
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