Many people with home based businesses think that they do not need business insurance, or that their homeownerâ€™s insurance will protect them from any business liability. Unfortunately, this is not true, and it leaves the home based business owner vulnerable to potentially losing their most valued possessions. Any business owner needs business liability insurance, whether the business is in or outside of their home.
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Homeowners insurance is not usually designed to cover the use of the home for a business, and in some cases operating a business out of the home can invalidate a homeownerâ€™s insurance policy. It is a good idea to check with the homeownerâ€™s insurance agent to determine what is and is not covered under the policy.
Home Based Businesses
Home based businesses are growing. One reason for the emergence of home based businesses is the economy. When people are out of work for an extended time, many turn to ways to make money by starting their own businesses or joining one of the many multi-level-marketing companies such as Avon or Tupperware. With hard work, these businesses can be quite profitable.
Growth of Home Based Businesses
Another reason for the growth of home based business is that retirees do not feel they want to just stay at home and not work. Many are utilizing their years of expertise in the corporate world to work as independent consultants, or start their own businesses doing something they truly love. These retirees especially need to protect their homes and valuable with the proper insurance, as they worked so hard to obtain them.
Home Business Office
A person starting a home based business will probably want to use a room in the home, or separate an area of the home to utilize as office space. This makes sense, as only designated rooms or segregated spaces in the home that are used exclusively for the business can be deducted as business expenses with the IRS. There will also be business supplies and equipment required for the daily operations of the business. These expenses and items need to be protected from any losses.
Home Based Business Insurance
There are several types of business insurance the home based entrepreneur needs to consider. But first, an evaluation of the type of business being operated should be undertaken. There is no one-size-fits-all business insurance for the home based business. There are certain insurance coverage levels the home based business owner should consider.
Different Types of Business Insurance
â€˘Business liability insurance â€“ clients visiting the home may have an accident and fall. The delivery person bringing boxes of computer paper or other products to the home could slip on ice on the walkway. These issues may not be covered by homeownerâ€™s insurance, so having business liability insurance will provide coverage for liability and medical bills in these situations. A business that takes no deliveries or does not have clients ever visiting the home will not need this type of insurance, such as a freelance writer.
â€˘Product liability insurance â€“ any business selling a product should seriously consider this insurance. A customer can be injured by the product, or claim injury from using the product. Product liability insurance will provide coverage for the business owner in these situations, which are not too far-fetched in the litigious society of today.
â€˘Loss of income insurance â€“ a working person has coverage for sick days and major illnesses, but an independent business person does not. Business interruption insurance, or loss of income insurance, covers those incidents of major illnesses, fires in the home or other serious interruptions to the normal business operations.
â€˘Errors and omissions insurance â€“ also known as professional liability insurance is necessary if the business owner gives advice of any kind. A financial planner, lawyer, accountant, or consultant may need errors and omissions insurance if a client decides to sue if they acted on the advice of the business person and did not get expected results, even if the business person did not make any mistakes or give bad advice.
â€˘Health insurance â€“ many times business owners do not consider this as business insurance, but it is one of the most critical insurances a home based business person can have. One major illness can wipe out not only the business, but the business persons total financial security. Medical bills are the number one reason for bankruptcies in the United States. A good health insurance policy that covers major medical insurance expenses protects the business ownerâ€™s personal assets and finances.
Obtaining Insurances for Home Based Businesses
The easiest way to get insurance for a home based business is to add riders or endorsements to a homeownerâ€™s policy. However, while this may be the least expensive way to get insurance coverage, it will provide the least amount of coverage. It may work well for the home based businesses that do not see clients in their home, such as an independent consultant that only visits clients at their place of business.
Home Business Insurance Policy
A business owner operating from their home that sells or produces products may want to consider a Home Business Insurance Policy that will cover business and personal liability. These insurance policies not only cover liability, but can be constructed to cover loss of income, business expenses, equipment and data. They can also provide coverage for losses incurred by fire or theft. As with any insurance, the higher the amounts of coverage, and the number of situations covered will increase the premium payment of the policy.
Business Owner Policy
Business Owners Policies will offer the most comprehensive levels of coverage, including personal injury protection. This is for the home based business that has major investments or perhaps manufactures their own product. The home based business, such as a doctorâ€™s office, where clients visit the home often should have this level of coverage.
Gathering Competitive Quotes
Protecting the business and the business owner is important for the home based business operator. Contacting a good business insurance agent to compare rates can help determine the appropriate coverage levels required.