Do I Need Insurance for my Home Based Business?

Generally, you do not meet with clients at your home office if you run a home-based business. In a home-based business your bigger concern is protecting the equipment (property insurance), not the customer liability (casualty/liability insurance). Depending on the scope of your home-based business, your homeowner's policy might not be enough to cover the cost of your business equipment. A homeowner's policy usually covers for a small amount, but it is often not enough to cover you business equipment losses. If this is the case, you will have to shop around for more substantial business insurance or increase the coverage of your homeowner's insurance.

Even if you are not meeting clients in your home, you might have liability issues. If, for instance, you are selling food products wholesale or creating a product, your product will still have liability. You should get special product liability insurance based on what type of business you are doing. The pricing of this insurance will depend on the type of product, forecasted sales amount and history of business.

Finally, if you are a professional such as a lawyer or doctor working from your home, you might need to purchase professional liability insurance for your home-based business.

Insurance Solutions for the Home-Based Business

The easiest way to insure a home-based business is to increase the coverage of your homeowner's policy to a suitable amount. With a small premium increase, you can increase your property coverage by thousands of dollars. This increased coverage will cover the cost of your business equipment as well as the personal property in your home.

The homeowner's insurance packages are very limited. If you have expensive equipment, many clients visiting, or you are a potentially risky business, then you will have to purchase a home-business insurance policy. The home-business insurance policy offers you better coverage against business interruption and product and service liability, and provides more protection against customer liability and lawsuits. Some home-business insurance policies allow the home business to have full time employees. Overall, this solution is more comprehensive and more professional; however, be prepared to pay more than you would if you just extended your homeowner's policy. Keep in mind that home-business insurance and homeowner's insurance are two different insurance solutions.

If you have an outside office or storefront, you need regular business insurance. This is usually referred to as a business owner's policy. This type of insurance covers many business risks and can be customized to fit your particular business needs.

What type of business insurance should I get?

Insurance can cover a variety of catastrophes including natural disasters, fire and theft. Providing good health coverage for your employees can help you retain them. However, these are not the only types of insurance available. You may be required to carry life, business interruption, or auto insurance depending on the nature of your business. Other types of insurance cover business liability or damage to your inventory.

Banks, investors, and other lenders may require a business owner to have good insurance coverage before processing a loan; this minimizes their risk of losing their investment. Investors and partners may also require a business to have a "key man" insurance policy—life insurance on the owner or crucial employees—so the business can survive in the event something happens to these people.

Types of Insurance:

Property Insurance covers property loss from fire, smoke, theft, explosion, vandalism, and other disasters.

Liability insurance protects your business in the event that your business activities cause harm to a person.

Crime Insurance protects against burglaries, robberies, and employee theft.

Auto Insurance protects against injury and the cost of repairing your vehicle.

Business Interruption Insurance protects against the loss of projected earnings due to a temporary shutdown of the business.

General Liability Insurance covers legal liabilities from accidents and other injuries dealing with your business, with the exception of a work-related injury.

Health Insurance protects the owner of the business in case of illness by providing payment for medical expenses.

Business Life Insurance covers against the death of a key participant in the business such as the owner or partner.

Disability Insurance covers you in the event you become disabled and cannot work..