5 Important Insurance Questions for Your At-Home Business
When your home is where you do business, you may need business insurance. Here are some answers to common insurance questions that might arise if your small, home-based business takes off.
Does My Personal Insurance Cover My Business?
In some cases, your personal home or auto coverage is adequate for covering the work you do from home. But you should talk with your insurance agent, because there are many complexities at play. For instance, your homeowners policy may have exclusions that specifically state that business-related losses are not covered.
There also may be gaps in your coverage that leave your business at risk. Either of these shortcomings usually can be remedied by your agent with an endorsement — coverage added to an existing policy to protect against specific risks, in this case losses related to your business.
How Big is My Business?
There is no universal point at which a home-based business grows too big to be covered by personal insurance. But, assessing your business’s level of exposure — susceptibility to financial risk or loss — can help you know when it’s time to consider business insurance.
If you sell a few handmade crafts at the farmer’s market each month, your level of exposure is low and your personal insurance policy (possibly with an endorsement) may be fine for the foreseeable future. But if you’re selling hundreds of crafts each month online, and you have a garage full of valuable equipment, supplies and products, your exposure is much greater and business coverage may be necessary.
Do I Need Additional Car Insurance?
It depends on exactly how you are using your personal vehicle. If you’re simply driving to meet with clients, your personal car insurance policy may be adequate. If you’re transporting goods, samples or equipment related to your business, these assets are unlikely to be covered by your personal auto policy, and you are risking significant losses on the road.
For the gray areas in between, an endorsement added to your personal car insurance policy may be sufficient. Talk with a knowledgeable insurance agent to know if you need commercial vehicle insurance.
Do I Need Business Insurance if I Don’t Have Products?
Your business insurance needs are tied to your level of exposure, not necessarily the value of physical assets, so business coverage — especially liability coverage — may still be necessary. For example, if you have clients or employees in your home regularly and an injury were to occur, your homeowners policy may not cover your losses.
Otherwise, less common situations can arise as well. A freelance writer might be accused of slander or libel, or customers’ credit card information could be accessed by a hacker. These situations result in incredibly costly legal action. Business liability insurance can protect you from all of these losses and many other scenarios you may not even consider.
How Does Applying for Business Insurance Work?
Applying for business insurance is similar to applying for personal insurance, including filling out a number of forms and answering pertinent questions. Be cautious, however, because business insurance is too complex to get an accurate quote online; you need to speak with an agent. In addition, business insurance rates are based on the risks associated with your business and your history of business ownership.
If this is your first business, the agent and underwriter may ask about your past work experience to assess the risk. Generally, expect the various types of business insurance to be more expensive than their personal insurance counterparts because of the increased exposure to loss.
If you host your business at home, start a relationship with a knowledgeable insurance agent to have the right coverage for your business.
– Written by Matt Forrest, last updated in December 2022.