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Insurance & Your Home-Based Business

Updated: Jun 1, 2023

Disclaimer: Informational statements regarding insurance coverage are for general description purposes only. These statements do not amend, modify or supplement any insurance policy. This website does not make any representations that coverage does or does not exist for any particular claim or loss, or type of claim or loss, under any policy. Whether coverage exists or does not exist for any particular claim or loss under any policy depends on the facts and circumstances involved in the claim or loss and all applicable policy wording.

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If you own a home-based business in New York, you already know there are many benefits to running your company from the comfort of your own home. This unique set-up offers a comfortable and easy way to work while keeping your costs low (and, let's face it - it might even allow you to work in your PJs some days!).

However, you may not realize your home insurance policy may not cover your business assets or activities. That's why it's so important to understand home-based business coverage and how it can protect your small business.

In this blog post, we'll discuss the type of coverage you may need to safeguard your business - and where to go if you need help breaking things down even more.

What Are the Limitations on a Homeowners Policy for a Home Run Business?

First, it's important to understand that homeowners' insurance policies typically do not provide coverage for commercial activities.

So, if you are running a business out of your home, your homeowner's policy may not cover a business's property, including technology, files, and professional equipment.

This coverage would require a separate policy like a Business Owner's Policy (BOP).

Also, if you're planning to have customers coming to your home for your business, you need to be aware your homeowners' policy probably won't cover any injuries that occur on your property. In this case, to protect your business, you should consider purchasing a separate liability insurance policy.

This policy can provide coverage if someone is injured while on your property for business purposes.

What is Home-Based Business Insurance?

So if homeowners insurance won't cover your business, what will? It's Simple - home-based business insurance.

This is a type of insurance designed to protect your business from risks like property damage, liability claims, or other unforeseen events.

Unlike traditional homeowner’s insurance, it covers the specific needs of a home-based business. This type of insurance can help cover the costs of repairs for any equipment or materials that are damaged, as well as protect you from any liability claims that may arise from your work.

Besides providing some basic protection to your business, having insurance can also give your clients peace of mind. They’ll know you have taken the necessary steps to protect their interests and they can trust you to deliver quality work. This can be a great selling point when it comes to attracting new business.

Do I Need Home Business Insurance?

As a small business owner, you’ve put in countless hours building your company. You may have even started it from the comfort of your own home.

But have you considered the potential risks that come with running a business from your residence? Without the right coverage, your business could face financial and legal challenges.

Here are some questions to ask yourself if you're not sure whether you need to invest in home-based business coverage.

  • Do my customers come directly to my home for products or services?

  • Am I storing supplies or inventory at home?

  • Will I lose income if I had to close my business due to damages to my home?

  • Do I have employees who work inside my home?

  • Are client or employee records maintained on my computer?

If you answered "yes" to any of these questions, you may want to start a conversation with an insurance agent about purchasing home based business coverage.

Whether you operate from your home to save money on overheads or run a small business with significant revenue, having a comprehensive insurance package tailored to your business needs should be a high priority.

How Does Home-Based Business Insurance Work?

Home-based insurance is not a one-size-fits-all policy. There are multiple types and coverage options available. Here are three of them:

  • General Liability Insurance - This protects against third-party claims resulting from physical injury or property damage caused while conducting business in your home.

  • Professional Liability Insurance - This is also referred to as errors and omissions insurance. This insurance provides coverage in case of negligence, malpractice, etc. If someone claims they suffered financial loss due to a mistake they allege you made, this insurance would cover the legal fees you'll require to defend yourself.

  • Commercial Property Insurance - This covers business assets like products, materials, and equipment.

An excellent home-based business insurance policy changes according to your company’s requirements. The right insurance guarantees your business is covered in your unique situation.

Types of Business That May Need Home Based Business Coverage

If you're still not sure whether home-based business coverage is necessary, here are some common situations that might get the wheels turning.

First up - freelancers. Freelancers who work from home are increasing in number, and most of them need insurance coverage. These businesses sometimes deal with sensitive client data or expensive equipment that may be damaged or stolen. A home-based business policy can protect your business equipment, data theft, and cover any liability claims against you.

Another example is e-commerce. If you run an online store from your home, it's got its value in inventory and products, which need coverage. Home-based business policies that cover property-related damages like fire, theft, or physical damages to inventory can help you avoid losses.

Then there are daycare providers. Parents who provide child care services in their homes need protection. Children are prone to accidents, and anything can happen while under your care. You'll need liability coverage. On the other hand, if you’re working as a web developer from your kitchen table, liability coverage will still be essential, but you might want to make do with less property coverage.

As much as parents sign waivers, accidents still happen, and you might be held accountable for any injury or illness sustained by the child while under your care.

Finally, if you offer consulting/coaching services from home, you'll likely have clients physically coming to your home office. A home-based business policy can cover you from lawsuits resulting from bodily injury or property damage that may occur when clients are at your home-office for meetings or consultations.

There are all kinds of different home-based business coverage options - again, yet another reason why it's so important to work with an insurance agent who will be able to tailor the policy to your needs.

That said, a home-based business plan will usually contain elements like commercial general liability insurance, commercial property insurance, professional liability insurance, and sometimes, workers' compensation insurance (if you have employees).

Commercial General Liability

Commercial general liability insurance is designed to protect your business from third-party bodily injury, property damage, or advertising injury claims. It can cover the costs of legal representation, settlements, and judgments, and can help prevent your business from bankruptcy due to a lawsuit.

This type of insurance is essential for businesses with high liability risks like those in the construction or healthcare industries.

Commercial Property Insurance

Commercial property insurance is another policy that covers damage to property used for business purposes, including your home office, equipment, inventory, and supplies. It can also protect your business against theft, fire, and natural disasters.

This type of policy is ideal for home-based businesses that store materials or have expensive equipment, such as photographers or web designers.

Professional Liability Insurance

Professional liability insurance, also known as errors and omissions (E&O) insurance, is necessary for businesses that provide advice or consulting services like accountants, lawyers, or real estate agents. It can cover injuries or financial damage due to your professional mistakes, negligence, or bad advice.

Workers' Compensation Insurance

Workers' compensation insurance is mandatory in many states and covers medical bills and partial lost wages for employees' work-related illnesses and injuries. Even if you only have a few part-time employees, you must provide this coverage to protect them and yourself from costly lawsuits.

Disability Insurance

Many states, including New York State, also require disability insurance coverage for business owners. You will want to factor in your business structure and size for this one, so pay attention to the details and work with an insurance agent.

Homeowners Policy Endorsement

Remember, in some cases, a homeowners policy endorsement may be all the coverage you need. It adds basic business property and limited liability coverage to your existing homeowners policy. This option may work for businesses that do not require significant liability coverage or have expensive equipment.

However, remember to keep in mind most homeowners policies may exclude business-related activities, so be sure to review your policy with your insurance agent.

Final Thoughts

Running a home-based business can be a great way to turn your passion into a successful career. However, it's essential to ensure you have the proper coverage to protect your business and personal assets.

Don't risk your livelihood by assuming your homeowner's insurance policy covers your business. Take the time to review your insurance coverage and make adjustments as necessary. By doing so, you'll have the ultimate peace of mind knowing you're fully protected, both at home and at work (or in your case, at both).

Need help? Contact the team at Northern Insuring Agency. Our professionals can help you figure out which home based business coverage will be the best option to help you grow your business - without having to worry about red tape or restrictions.

Get in touch today for a quote! Northern Insuring will simplify the complicated...for insurance.

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