Understanding home business insurance

by Tracy Myers

Insurance is almost never a fun topic to discuss. Unless you're reading an exciting novel about insurance fraud or you're getting a major insurance payout for something minor, insurance is usually a dull, if not grim topic. But, like many somewhat dull topics, insurance is a very important thing to read about, discuss, and research. 

Motivated chef in kitchen

This is particularly true for non-traditional business owners. As more and more people enter non-traditional professions, home-based insurance has become more crucial. Many small businesses that are run out of the owner's home forgo the insurance process. This occurs for several different reasons. In some cases owners are confused about what may already be covered by homeowner's insurance and others are worried that the premium costs will outweigh the actual protection offered. As a home-based business owner, it is essential that you research your insurance options and understand the different policies available. 

There are three basic types of home-based business insurance to choose from depending on your business specifics. 

Rider to homeowner's insurance policy

This is one of the simplest ways to obtain business insurance protection and is typically one of the least expensive. A "rider" is an add-on to homeowner's insurance or a renter's policy to also cover your company. The cost of this add-on is typically minimal, but will only provide a small amount of additional coverage as well. This type of business coverage is most appropriate for extremely small home businesses. One-person businesses without a lot of valuable equipment or many business-related visitors would suit this type of policy well. Business owners who are unlikely to suffer any major loss due to some sort of disaster such as fire should consider a rider. If your home business operation is any larger than just one person and doesn't fall in the other categories listed above, looking into your other insurance options is probably wise. 

In-home business policy

In-home business policies cover a larger spectrum of things, including loss of critical documents and theft. These insurance plans are usually issued by a home insurer or a specialty insurance firm will cover injury or theft for as many as three employees. This type of insurance coverage is typically more than an add-on to a home policy would be. However, while costs are higher, the plans usually cover thousands of dollars more in losses. Many home business owners will consider purchasing in-home business insurance as well as other coverage. For those interested in an in-home policy, you'll need to find a policy that covers your type of business within the state you do business. Each state establishes and recognizes its own rules about home-based business insurance coverage. 

Business owner's policy

This is the "real deal" of business insurance for home business owners. For entrepreneurs who need more than $10,000 of coverage should look into a business owner's insurance policy. This is the type of policy that traditional, brick-and-mortar businesses use for their insurance coverage. With online retail and business taking off so considerably in recent years, there are plenty of home-businesses large enough to warrant this extensive of a plan. Business owner's insurance covers things like damage to or loss of business equipment and other assets, liability for customer injuries, loss of critical records, malpractice or professional liability claims, and loss of income or business interruption in the case of power outage or disaster. These policies cost more because they protect against a higher amount of loss than both a homeowner's policy rider and an in-home business policy. 

Home business owners should shop around to be sure that they are getting the appropriate coverage for their business. Researching your options carefully and getting several opinions is the first step to becoming an educated and protected business owner.



is a fulltime blogger and freelance writer for www.homeinsurance.org. An early nester, Tracy is passionate about all things home related. She is driven in her writing to provide people with the best information on ways to protect their lives with home insurance coverage.
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