More than half of the businesses in the United States are based out of the owner's home, with more being added every year, according to research by the Small Business Administration. Many of those entrepreneurs think their homeowners' insurance policies cover their business needs when the unexpected happens, but the reality is that most homeowners' policies don't.
Homeowners insurance provides a limited amount of coverage for business equipment, but most standard homeowners' policies exclude coverage for businesses operating in the home. Most policies don't cover lost data, lost income or liability.
Here's when you should start exploring insurance options for your home-based business and what kinds of protection are available.
First, you should read your current homeowners insurance policy to determine what is covered and what isn't. Consider the following questions:
Does your homeowners policy limit coverage of business equipment?Most homeowners policies restrict coverage in this area, and some even consider operating a home-based business a violation of the policy terms
Do you have an office but work from home regularly?
In this situation, you may need additional coverage to help protect yourself from work-related incidents that occur in your home.
Do business contacts or employees visit your home, or do you do business in their homes?
Many home-based business owners are surprised to learn that their homeowners policies often don't cover third-party injury claims related to their work.
Do you keep business data at home?
Whether printed out or on a computer, security breaches and technology failures leave companies vulnerable to lost income and client lawsuits. Insurers offer policy options that can help protect home-based businesses from these threats.
Home-based business owners typically have three types of business insurance to consider. The policy you choose will depend on your business size and type, how often you have business visitors to your home and your exposure to liability, among other factors. The three types are:
Rider to a homeowners or renters insurance policy:
This low-cost option typically provides limited additional coverage. It may offer protection for a small amount of business equipment and liability coverage if a third-party, such as a delivery person, is injured in your home. This may be a good choice for a one-person operation with limited liability exposure, minimal amount of valuable equipment and no business visitors or deliveries to the home.
In-home business policy:
This type of insurance rolls homeowners and business coverage into a single policy that eliminates gaps and duplications in coverage. It offers business liability protection and replacement of lost income from fire, theft or other disasters. An in-home business policy may be appropriate for growing home-based companies with business visitors and valuable equipment. It typically does not provide errors and omissions coverage.
Business owner's policy (BOP):
This type of policy provides the most comprehensive coverage for home-based companies. It protects against unexpected business interruption, damage to business equipment or data, and malpractice or professional liability claims. Businesses that stock inventory, manufacture products, conduct business inside and outside the home or carry a high risk for professional liability may want to consider a business owner's policy.
What type of business are you running in your home? Your home business must comply with all federal regulations, health codes and city and state regulations. Failure to do so could void your existing coverage.
Does your business require you to drive? You may need a separate business auto policy. Your personal auto policy may not provide coverage if you are in an accident while visiting clients, making deliveries or using your car for other business purposes. Also, if you have employees working for you, you may need workers' compensation coverage.
Learn more about how Allstate can help you protect your home-based company. Find your local Allstate agent or call us at 1-888-322-3070.