There are plenty of people working more than one job to make ends meet or to afford a vacation or some other luxury. Call it a side hustle, working from home, or running a consultancy from you house. The simple fact is a home based business can be an important part of a family’s finances. It could also be the worst.
A Typical Homeowner’s Insurance Policy Excludes Commercial Pursuits
Unless you have a Home Based Business insurance policy added as an endorsement your homeowners insurance policy will not insure claims arising from business pursuits or any business use of the premises. While each insurance company’s policy wordings vary slightly you will find a similar sentence in the Exclusions Section of your policy wordings. Policy wordings are another way of saying fine print.
What Does Excluded Actually Mean in Everyday Life?
Imagine a person who performs a professional service, such as massage or other kind of complementary health offering, out of their own home. A client arrives at the home and proceeds to slip and fall, hurting themselves in the process. A claim is launched. The insurance company will review the details of the incident, including how the person hurt themselves and, more importantly, why they were at the home in the first place.
Without a Home Based Business insurance policy the professional will not have any coverage for the personal injury claim.
There are many other examples as well. If you have a home based business and your home is burglarised any professional items or contents will not be covered under the homeowners insurance policy.
Or, worse case, a fire starts because of business equipment failure. The insurance company, deeming the cause of the fire to be due to a business pursuit or use of the home, could deny the claim. That could mean a person is out hundreds of thousands of dollars and potentially have no home to live in.
What Will a Home Based Business Policy Provide?
One of the biggest growth sectors in business today is home based businesses. Not only are people running their own businesses from home, but more people are working from home for their employer. With this changing dynamic Insurance companies are evolving their products to meet the needs of today’s entrepreneurs.
For a home based business insurance policy there are two major coverages. They are:
Commercial Liability Insurance
For most home based businesses liability represents the largest need for insurance protection. Liability coverage provides protection in case of client injury while on your premises. Product liability ensures that should someone get hurt because of something you produce you will have protection. This coverage also responds to incidents where there is damage or injury due to your business operations.
Business Contents Insurance
Imagine for a moment that a person with a home based business suddenly lost all their business equipment due to an insured peril. Items, such as computers, marketing materials, inventory, office furniture such as desks and chairs and more, are expensive to replace. Having adequate business contents insurance means if the worst case should happen you can replace your losses and get your business back up and running quickly.
Specialized Coverage for Specialized Home Based Businesses
Consultants, engineers, writers, government contractors and many other professionals may require more specialized insurance than a basic home based business policy will provide.
Errors and Omissions Insurance
Errors and Omissions, or Professional Liability, provides specific protections for any claims that arise out of your professional work. Your clients, or in some cases, third parties, may call your professional work or advice into question and bring allegations against you, or your business. There could be claims alleging that they’ve suffered a loss as a result of your work.
Even if the claim is because of a small oversight or as serious as a blatant mistake you will be held responsible for any negative outcome or incident that happens as a result of your advice.
Further Reading: More About Professional Liability
Insurance Designed to Fit Your Business Needs
What risks your home based business has will determine what insurance needs your business has. No two home based businesses are the same. Different types of businesses require different types of coverage. A commercial insurance expert should take the time to understand you, your business, and your goals.
After the commercial broker understands your business then she or he can recommend the best insurance to fit your business. This is not something that is done once and forgotten. As your business evolves and grows so too will your insurance evolve, adapting to your business needs. A commercial insurance expert should be with you every step of your business journey whether you need a home based business insurance policy or a standalone Commercial General Liability policy with more coverage.
Would you like a second opinion on your home based business insurance needs? Please contact us here and select Business Insurance as the type of business.
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Thanks for reading.
Lackner McLennan and Erb and Erb create these informational articles with the intention of educating the public about insurance and investment related matters. This article does not substitute for broker advice regarding your specific insurance or investment needs. For a comprehensive strategy to tackle what you, your family, or your business, may need we invite you to speak directly to a broker who can guide you through all the options available to you.