Many business owners set up operations in their homes. It may be for convenience, reduction in operational costs, or the nature of the business does not call for a separate office.
One of the things that they need to consider, though, is insurance. Some think that having home insurance will suffice, as it can protect both their homes and their business. This is a common mistake.
As the name implies, home insurance provides protection only for the home, not the business operations. Also, when the insurance provider does not know that the home also serves as an office, the policy may become invalid.
There are several factors to consider when buying insurance for home-based business. The nature of the business says a lot about the kind of insurance needed to cover the home-based operations. Also, different types of coverage may be needed to cover different aspects of the business.
With so many insurers offering a wide range of insurance options, it can be overwhelming. To help make the selection process easier, here are some of the most common policies home-based business owners should consider.
General Liability Coverage
General Liability insurance provides protection in case a client or a worker (if you have) gets injured within the business premises or property. It’s a different case when someone who is not associated with the business gets injured, as the existing home insurance will cover it instead. This reason alone explains why there is a need to get a separate policy for home-based business activities.
Product Liability Insurance
If the business involves manufacturing or selling products, getting Product Liability insurance should be considered. Bear in mind that running a business comes with risks and it is essential to be prepared for unfortunate circumstances.
In case the products do not perform as expected, the Product Liability insurance will provide protection to the business. In case the business is just a contractor or service provider the General Liability insurance covers bodily injury resulting from a completed work of a contractor.
Business Contents Insurance
When operating the business at home, it’s a mistake to assume that having home insurance is enough to cover damages or loss to property. Consider getting a separate business contents insurance to ensure all business-related items will be protected against theft, loss or damage.
When it comes to this type of insurance, it is important to keep track of every item or piece of equipment used in the business, and how much each cost. Business owners need to determine whether or not they can cover the cost or replace any piece of equipment in case it gets damaged, lost or stolen. Also, take into account that any device or equipment that is used within the home office as well as outside the home will need different Content and Commercial Property insurance.
However, if all pieces of home-based office equipment are only used within the home, the existing home insurance will provide coverage.
Professional Liability Insurance
If the business involves providing services to clients, consider getting Professional Liability insurance. This provides protection against financial losses in cases when a client suffers damages while transacting with the business. Aside from protecting the business owner, this insurance covers compensation for damages incurred of the client.
Depending on the profession of the business this insurance is named differently. Malpractice insurance is relevant for medical professionals and covers damages due to treatments that did not go as planned.
For home-based businesses that provide professional advice the Professional Liability insurance is called Errors and Omissions Insurance (E&O). The errors and omissions insurance provides coverage against claims of clients who suffer damages due to an error in the professional advice, whether it is deemed wrong, inaccurate or insufficient. This also protects those who go to their clients to provide services.
Business Vehicle Coverage
When the personal vehicle is used in business activities, it is advisable to get Commercial Auto insurance coverage. This is to ensure that the finances will be protected against significant losses due to a vehicular accident. This insurance also protects the business against claims of people who sustain injuries from an accident.
Business Interruption Insurance
People are always told to have a plan or strategy when a disaster strikes. The same holds true for home-based businesses. It is essential to have a Business Interruption insurance for protection against lost income in case any disaster forces the business to halt operations.