Does homeowners insurance cover business property?
Last updated: January 1
A standard homeowners insurance policy may provide limited coverage for business property that is stored in your home. Not every homeowners insurance policy provides coverage for business property, however, and even if yours does, the coverage limits may not be high enough to protect it.
Although homeowners insurance includes personal property coverage to help protect personal belongings, the Insurance Information Institute (III) says that homeowners insurance usually provides minimal coverage for business property at your home. Additionally, there may be less coverage or no coverage at all for business property that is away from your home, according to the International Risk Management Institute (IRMI).
How do I insure my business property?
If you are running a home-based business or need more protection for business property that is in your home, you may want to consider purchasing additional coverage. Depending on your needs, you may have a few different options for protecting your business property.
Optional business property coverage.
You may be able to purchase additional coverage to increase the protection your homeowners insurance policy provides for business supplies. The III states that some insurers may allow you to increase the limit up to $10,000. Adding this coverage may help cover inventory, such as cosmetics or kitchen supplies, temporarily stored in your home as you're preparing to sell it or deliver it to customers.
For example, if your homeowners insurance limits coverage for business property to $1,000 but a fire in your home destroys $3,000 worth of inventory, you'd have to pay the $2,000 difference out of pocket to replace those materials. However, if you purchased $5,000 in optional business property coverage, you'd have enough insurance to cover the $3,000 loss.
Keep in mind that in both cases, you'd likely need to pay your deductible before you insurance benefits kick in to help cover the loss.
The III notes that coverage may not extend to certain types of equipment or businesses. For example, the limit for business property may not apply to computer equipment. Also, IRMI states that some policies may exclude coverage for items stored in a structure other than the home, such as a shed or detached garage.
It's also important to note that your homeowners insurance policy's liability coverage will likely not extend to business activities.
In-home business coverage.
If you need more protection than a homeowners insurance policy can offer, one option that some insurance companies offer is an in-home business policy or endorsement. This type of coverage generally provides broader protection than a homeowners endorsement may offer, the III says. In addition to providing coverage for your business property, it may also provide liability coverage and reimbursement for lost income if you temporarily can't operate your home-based business after your home is damaged during a fire or other covered loss. An in-home business policy also typically provides coverage for business materials stored in another structure, such as a shed, on the property, says IRMI.
Business owners policy.
Some home-based business may not be eligible for optional business property or in-home business coverage due to the type of business or its annual revenue, states IRMI. That's where a Business Owners Policy may help. In addition to providing coverage for business property and lost income, the III states that the coverage is broader than an in-home business policy and may also provide liability coverage and extend to business property that's away from your home.
If you have questions about what your homeowners insurance policy covers or want to discuss whether additional coverage may help better protect your business, your agent can help you choose the coverage that fits your business needs.