If you have recently started your own business and work out of your home, you'll probably need to upgrade your insurance program. At-home business owners often make the mistake of assuming that their homeowners policy covers their business equipment. In fact, your homeowners policy may include little or no coverage for your business property and business liability exposure. You also should consider the need for business interruption insurance, workers' compensation coverage, and business automobile coverage. Finally, you should examine your need for life, health, and disability insurance.
Homeowners policies generally cover business property on your premises only to a certain limit, usually about $2,500. Coverage for business property away from your premises is even more limited, with most policies having a $250 maximum. That is the extent of insurance coverage for your business in the typical homeowners policy. You are not covered for business liabilities, including such things as a deliveryperson or a client injuring themself while on your property.
For a higher premium, some insurance companies offer an endorsement that you can add to the standard homeowners policy. An endorsement allows you to increase the liability limit for business property and add a small amount of general liability coverage. The endorsement is designed for very small businesses. However, even with an endorsement, your business is left with uncovered exposures.
Home office policy
Many insurance companies now offer the home office policy, which is a combination of a homeowners policy and a business owners policy. This policy provides adequate business liability coverage, business interruption coverages, and increased limits for your business property, along with the traditional coverages found in a homeowners policy.
The business property limits typically begin at $10,000. Depending on the policy, the business liability limits may range from $300,000 to $1 million. The policy covers lost income and continuing expenses for up to one year in the event your home is damaged and you're unable to work. The policy also covers loss of valuable papers and accounts receivable, while offering higher limits for equipment breakdown coverage and business property used off-premises.
Business owners policy
This type of commercial policy is designed specifically for small businesses. Traditional business owners policies (BOPs) are very comprehensive because they cover buildings, business property used on- and off-premises, and liability. Also covered are computers and other business equipment, software, data, loss of income, continuing expenses, and professional liability for certain occupations.
Some insurance companies have created a new kind of BOP designed specifically for the at-home business. This policy is less expensive, and it provides broad-enough coverage for a larger business without duplicating your coverage. For example, the new BOP would not cover your home structure, because it is already covered by your homeowners policy.
Umbrellas and professional liability
An umbrella policy provides increased liability limits beyond those in separate policies. For example, say you have a BOP with a general liability limit of $3 million. If you think you'll need more than $3 million for your business, an umbrella policy will pick up where the BOP leaves off. If you purchase an umbrella policy with a $5 million limit, your total limit of liability would be $8 million.
For those in occupations that are particularly vulnerable to professional liability, a separate professional liabilit