According to the National Burea of Labor Statistics, 3 out of 10 homeowners operate a business out of the home.  More than 66% of the estimated 20.7 million people who work at home are self-employed and run a home based business.  It’s estimated that more than half of the homebased businesses are underinsured.  40% of those survey by the Independent Insurance Agents of America say they were uninsured because they believed that their homeowners insurance covered the business.

When you started your business out of your home, getting insurance to protect you probably wasn’t at the top of your to do list or you were one of the 40% above and thought that your homeowners insurance would cover you.  It is important to get insurance coverage for your home based business to protect you when the unexpected happens and it will!  Your homeowners policy specifically excludes any claims resulting from business pursuits and provides a minimal amount of coverage for any business property (usually less than $2,000). 

The least costly way to cover your business is to add an endorsement to extend your personal liability coverage on your homeowners policy to cover your business pursuits.  This is extremely important coverage to have, especially if you are going to have client meetings at your home, customers coming to you home to drop-off or pick-up merchandise, or have any other members of the public enter your home.  The liability coverage will protect you in case anyone is injured while they are on your property.  You can usually add business liability coverage to you homeowners insurance policy for less than $100/year.  If you wanted to get a separate business liability policy the premium would start at $300-$500/year.

Now most homeowners policies will limit the amount of coverage that they will provide for property related to the business, so you will have to purchase extra coverage to cover your business property.  So be sure to ask what the business property limits are to make sure that you are adequately covered.  You don’t want to find out at the time of a fire that your $10,000 of inventory that was destroyed was only insured for $2,000.  Now some insurance companies will automatically increase the amount of coverage for your business property when you extend your liability coverage.  The company will allow you to allocate up to 10% of the insurance that you carry on your personal belongings to cover your business property. 

Other types of insurance that a home based business might want to take into considerations are: workers compensation (if you have employees), product liabililiy (if you make a product and it doesn’t work correctly or causes injury to someone), errors and ommission (if you provide a service like accounting, insurance or attorney), malpractice (for doctors that have offices out of their home)