With the entrepreneurial spirit at a high here in the United States, many people are starting businesses based from their home in order to save cost in the early months and to provide an element of convenience; they can use as much time as possible to get their business off the ground without having to leave their home. Home-based businesses are great, but many insurance professionals run into a common problem where clients feel their home-based business don’t need a separate insurance policy. Many of us consistently hear that the client think their homeowner’s insurance will cover them if anything happens, this however, is incorrect in most cases. Having a separate insurance policy for your home-based business is crucial in protecting yourself and your business. Below are the four most important reasons to get a policy in place for your home-based business:
1. Cover Your Business Property
Most business owners are under the impression that their homeowner’s policy will cover their business property, such as computers, desks, inventory, etc., however, the majority of homeowner’s policies only have a limit of $2,500 for property related to a home-based business. In cases of fire or theft this may be enough money to get a new computer but not much else. If your business produces a specific good and you are stockpiling inventory, I would venture to guess $2,500 won’t be enough to replace what you have made.
2. Liability and Medical Payments for an Injured Person
What happens if a customer visits your home for a business-related purpose, then accidentally falls down and hurts themselves? Most home insurance policies will not cover liability or medical payments related to the home-based business.The lack of coverage could leave your business open to potential lawsuits and out of pocket costs that would normally be covered under a business insurance policy.
3. Business Income Coverage
If your home were to suffer a loss (i.e. fire) that made your home uninhabitable, how would you run your business? Would you be able to afford the expense of renting a space temporarily? Would you be able to continue providing your product or service without your home available? Business Income coverage is an important part of a business insurance policy; however, it is not something that would be included on a homeowner’s insurance policy.
4. Cyber Liability Coverage
Does your business collect sensitive personal information about your customers? If so, what would you do if your computer was hacked and customer information was stolen? Would you have the funds to pay for the legal notification process to let customers know their information was stolen? Would you have the funds available if a customer sued you due to the breach? A business insurance policy can include coverage for these types of scenarios, a homeowner’s policy can’t.
As business owners we understand the importance of controlling costs, especially when we are first starting out. Insurance is a cost; however, it is a cost that can protect you from even larger expenses down the road if you do have an issue arise. The most important thing a business owner can do is to protect their business and all the time, sacrifice, commitment, and dedication they have put in to it.