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Does Homeowner's Insurance Cover Your Home Based Business?
If you’re one of more than 38 million people working from your home in any capacity, beware: your home insurance may not provide adequate protection for your business, no matter how small. Thanks to the digital revolution, it’s never been more convenient to earn a living from your living space – but with each reward comes risk, and without the right coverage, that extra cash flow can turn from positive to negative.
Unfortunately, too many at-home earners aren’t aware of the gaps in their coverage until they’re presented with a dire situation, be it a hurricane or any other disaster. Their inventory and business property can literally go up in smoke, ruined by a water leak, or be outright stolen. And if they are relying on their homeowner insurance to pick up the pieces, they may be surprised to find they have very little financial recourse.
So what should you look for in a home-based business insurance policy? It can be complicated – which may be why so many people don’t have the insurance they really should. If you operate or conduct any sort of business out of your home, be sure your insurance partner offers some, if not all, of the following coverage options to best protect your interests.
Here are 10 coverage options that every home-based businessperson should opt for:
1) Replacement Cost Coverage for your Home Business Property. Broadly, this covers business personal property and home business property or inventory– such as a burst pipe damaging a wedding photographer’s camera equipment. Replacement Cost Coverage for your Home Business Property also includes personal property owned by others in your care, custody, or control for business purposes. (Think that wedding photographer’s client’s photo album...) This versatile policy is available for most professions.
2) Coverage for Other Structures on your property used for Home Business. For businesses that store their business property in a free standing garage or other structure on their property, special coverage is needed. Direct sellers for multi-level marketing brands often have a supply of expensive jewelry, candles, skin care products, clothing, etc. in their garage. Make sure you’re protected if that structure collapses under heavy snow.
3) Loss of Income and Extra Expense Replacement. As an option to guard against dreaded downtime, this protection covers loss of business income that would have been earned (and related incurred expenses) during an interruption of home business, or when the premises is unfit for occupancy due to a covered loss. Loss of income and extra expense protection can help take the sting out of a terrible time.
4) Business Liability. Business liability insurance can help protect you from a variety of claims, including bodily injury or property damage to others that can arise from your business operations. An at-home dog groomer may have customers coming and going from their home – and a customer may slip on the front porch, resulting in severe injuries. This type of coverage can shelter your assets, keeping them beyond the reach of a legal action.
5) Money and Securities Coverage. This coverage protects insured monies against loss by theft, disappearance, or destruction both on and off-premise. A jewelry crafter may keep the cash from her sales in a small safe in her home office, depositing the money in the bank once a week. If her home is robbed and the safe is stolen – or if her purse is snatched on the way to the bank – she won’t shoulder the financial loss.
6) Valuable Papers and Records Coverage. This coverage is especially useful for graphic designers and other creative professionals, since it provides coverage for the cost to reproduce most printed documents in the event of an accident. If an architect’s blueprints suffer some misfortune inside the home, he may claim money for the time already spent on the project.
7) Property of Others Coverage. Do you handle your clients’ personal belongings regularly? Consider opting for a policy that covers situations where personal property is temporarily in the care or custody of another person or entity. A work-from-home tailor who experiences a grease fire in the kitchen may also experience smoke damage to a client’s clothing. Property of others coverage will benefit both the business owner and the client.
8) Computer and Software Coverage. Tech jobs have seen a widespread exodus from on-site locations to home offices. If you’re a den-dwelling digital nomad, be sure your insurance covers digital hardware and software in the event of damage to your valuables during the course of business. Something as simple as a prospective client spilling a glass of water on your laptop can turn into a business disaster without the right coverage.
9) Professional Liability Coverage for Certain Professionals. You’ll need to speak with your local insurance agent to find out if your profession is eligible, but know that there’s coverage for when a business owner renders a professional service and an accidental mishap occurs. For instance, if an at-home barber accidentally cuts his client’s scalp and the client intends to seek payment for damages, he is covered.
10) Excess Liability Coverage Included in Your Homeowner Policy. Lastly, consider an option that has everything you need for homeowner, business and excess liability coverage, all under one policy. In the event a catastrophic claim comes your way from any one of countless scenarios, excess liability coverage puts a limit on top of your underlying policy.
Home-based business insurance picks up where homeowner insurance leaves off. So whether you’re an evening accountant, social media influencer on the side, full-time day trader, or home-party sales maven, make sure you’re covered. After all, you’re in this to make money – not lose it because you don’t have the right insurance.
Article written by Gary Capone, CPCU, ARM for FORBES MAGAZINE ONLINE ... Gary is Vice President of Field Services, Franklin Mutual Insurance (FMI), where he is responsible for Agency Relations, Marketing, and Loss Control. He has over 36 years experience in his industry, where he began as an insurance agent in 1981. Gary is active with the Independent Insurance Agents and Brokers of New Jersey, a Chartered Property and Casualty Underwriter, and has an Associate Risk Manager designation.