Home-based business insurance

Home-based business insurance

You may not give a lot of thought to safety when it comes to your home-based business. It's not top of mind for most small business owners, especially those who live in a neighborhood that is relatively free of crime. However, there are many other ways in which you need to protect yourself, aside from a simple robbery, so you must consider other risk factors.

According to the 2012 Global Entrepreneurship Monitor report, nearly 70% of all entrepreneurs begin their small businesses at home, and more than half of them continue to run their companies out of their homes long after the company has become established. And these home-based companies are not single people working alone – only 25% claimed they had no employees. You might have someone working on your premises, or you might have someone working for you virtually, but you need to make sure that every single person is safe when dealing with your company.

If you run a business, you have a lot of stakeholders to protect – yourself and your employees, your customers and clients, your suppliers, and possibly your investors. And you don't simply have people to physically keep from harm – you may have inventory, and you certainly have information. You also have to worry about your access to credit, and above all, your business reputation.

Because of all of these factors, you must consider the full range of protection when ensuring the safety of your company.

Protect Yourself

Of course, the primary concern is your own and your employees' physical safety. Make sure your workplace is secured, and consider installing cameras for monitoring the exterior of your property.

It is smart to meet clients or potential employees for the first time at a neutral, public place, before inviting them into your home, especially if you frequently work alone. Do not give out your physical address on your business cards; instead, use a P.O. Box, and use a business phone rather than your personal cell phone number.

And if you ever get an uneasy feeling about a new client or employee that you have invited into your home, be sure to heed the instinctive warning that your body is giving you. You may not know why, and you may end up being proven wrong later, but it is always better to be safe now than sorry later.

Protect Your Clients at your House

If you have clients come to your house, you must be sure the environment is free from hazards. So put away all the excess things that you can trip over, and make sure your pets are locked away from strangers. (Everyone says “Oh, my dog doesn't bite” up until the very first time that it unexpectedly does.)

Insurance-wise, you should obtain a commercial liability policy to protect anyone who comes to your house on a business-related matter. This is because your personal homeowners policy will not cover you if your insurance company determines that the people were on your property for a business reason. This applies not only to customers and clients, but to delivery people as well, including USPS and UPS.

This insurance will protect you if anyone is injured while they are on your property due to your business, and it doesn't matter if it was your fault or not. The policy will pay any medical bills and will even help to settle lawsuits if anything that serious ever happens.

Protect Your Vehicle

If you use your car for any business reason - picking up or delivering products, or visiting clients when you provide services - you will need to get a commercial automobile policy. The reason is that your insurance company can deny your claims if it determines that your accident occurred while you were conducting business; your personal auto insurance policy will not cover such a situation.

You need to be covered not only for damage to your vehicle, of course, but also for any liability that may arise from an accident that is caused by your vehicle while it is being used in the conduct of your business. So if you accidentally hit and injure people, your liability could be enormous, and your entire business could be in jeopardy depending on how your business is structured and what kind of insurance you are carrying.

Protect Your Stuff

Your personal homeowners policy does not cover any business equipment or inventory. It is not unusual for a home-based business to acquire thousands of dollars in computer equipment and maybe tens of thousands of dollars in inventory, and none of that will be covered in case of theft, fire or other damage to your house. If it is discovered that you have an undisclosed business, your insurance company may not only deny your claim, but they may also cancel your current homeowners coverage as well.

Three Ways to Protect Your Business

There are three ways that you can purchase the coverage that you need:

  1. A rider onto your personal policies – this will be the least expensive of your options, as it is simply an addition to your existing homeowners (or renters) and auto policies. This will, however, provide the least amount of protection as well, and may not be sufficient, depending on the nature of your company. (Typical riders cost approximately $100 a year and cover up to $2,500 in equipment and inventory, while providing no coverage for injuries sustained by employees, suppliers or clients.)

  2. An in-home business policy – this can be issued by your homeowners company or a specialty commercial insurance firm, and covers a broader range of potential liability. It may cover up to three employees, will generally cost up to $500 a year and will provide approximately 10,000 in coverage.

  3. A business policy – similar to the policies that ordinary companies carry, this can be tailored by your commercial insurance company to provide exactly the coverage that you need.

As your company grows, you may have to consider additional insurance coverage, such as worker's compensation and life insurance. But you must consider this a necessary expense, and not a luxury that you will get around to purchasing "when you can afford it” to be sure that your business is protected from all sorts of potential disasters.

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