Is Your Home Based Business Underinsured

15
March 2017
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Do you operate a business out of your home? If the answer is yes, you are not alone. More than half (51.6%) of all small businesses are home-based. Unfortunately, millions of US small business owners are facing a huge financial risk as they operate their businesses from home.

Uninsured and Underinsured: the Home Based Business Peril

Most home based business owners are vulnerable to significant financial losses because they do not have proper insurance coverage for their business, according to a survey commissioned by the Independent Insurance Agents & Brokers of America (IIABA).

A staggering 60% of home based business owners are either uninsured or underinsured.

And many of them don’t even realize it.

The two biggest reasons that business owners gave for not protecting their financial assets with insurance are:

  • Mistakenly thinking homeowners insurance covers their business
  • Believing their business is too small to need coverage

These two misconceptions are leaving business owners vulnerable to losses that could cripple their business or worse -- shut it down for good.

The Homeowners Insurance Myth

Nearly 40% of survey respondents thought their business was protected by some other coverage, such as homeowners insurance.

Homeowners insurance will typically provide a limited amount of protection for your business equipment if you operate out of your home, but the limits are low. Generally, the limit for your equipment is $2,500 while at home and only $250 if off premises.

If a fire broke out at your home and destroyed your home office equipment, would $2,500 be enough to replace your desktop, laptop, tablet, printer or other home office equipment?

What about specialized equipment such as contractor tools or business inventory stored at your home?

Most homeowners policies specifically exclude business liability coverage. Which means you could be liable if a customer is injured while visiting your home for business purposes or if the delivery driver is injured while picking up a package from your home based business. Homeowners policies typically won’t cover loss of income, either.

The “Too Small for Insurance” Misconception

Is your business really too small to insure? Consider this: only 6.9% of home based businesses had $250,000 or more in receipts, according to the US Census Bureau. Approximately 57% of home based businesses brought in less than $25,000. But every single home based business has something to lose.

Many home based businesses are owned by sole proprietors. Which means it’s not just their business assets at risk in the event of an injury, damage to someone else’s property, accident, or other liability situation. If you’re a sole proprietor, your personal assets can be at risk, too.

Could you afford the out of pocket expenses if you damaged customer property or someone was injured because of your business?

In reality, it’s often the smallest businesses who wouldn’t survive an accident, injury, or other incident.

The good news is this: you can protect your business and your personal financial assets with the right insurance coverage for your business. And the better news is…

It can be quite affordable, even for the smallest business.

How to Insure Your Home Based Business

Depending on the nature of your business and your insurance provider, the following three options can help you get affordable insurance for your home based business:

#1. Homeowners Policy Endorsement

Want to increase the amount of coverage for your business equipment and add business liability protection to your current homeowners policy? For certain businesses who rarely see clients or visitors in their homes, such as writers, web developers and graphic designers, a homeowners policy endorsement may be the perfect solution.

#2: Business Owner Policy (BOP)

Business owner policies were created to provide small and medium sized businesses with affordable protection against the risks their most likely to face. A BOP will typically cover business property and equipment, business liability, and loss of income.

#3: Custom Business Solution

Sometimes your business needs an insurance solution as unique and individual as your business is.

  • Do you spend your days working out of your vehicle? You may need commercial auto coverage to protect your car from an accident that occurs while you’re using it for work purposes.
  • Do you have full- or part-time employees? You most likely need workers’ compensation coverage.
  • Do you transport your equipment and tools back and forth from trade shows, to clients, or to project sites? You may need inland marine coverage to protect your high-value mobile equipment.

Talk to your insurance provider today about insuring your home based business, and you can find the best solution to protect your assets at a price that’s affordable for your business. If you want your home based business to succeed, the #1 best thing you can do for it is to be sure it’s protected against the risks that could financially ruin it.

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