Does
Your Home Business Need Insurance? Here's a look at the most common types of coverage for home-based companies and what make sense for your business. 1. Rider to a
homeowner's or renter's insurance policy
The
most inexpensive home-based business insurance is an add-on or rider that
expands a homeowner's or renter's policy to cover the company. The cost of such
a rider is minimal -- perhaps $100 a year -- but it generally provides about
$2,500 of additional coverage, says Loretta Worters, vice president of the
Insurance Information Institute in New York City, an industry trade group and
information clearinghouse.
This
type of insurance may be appropriate for a one-person business without a lot of
valuable equipment or many business-related visitors, and unlikely to suffer a
major loss if unable to operate for a while as a result of fire or another
disaster. Such coverage may work, for example, for an accountant who works at
home preparing customers' taxes and delivers the returns via email, Hanley
says. But it could leave a home-based business owner on the hook for costs such
as a large medical bill for that injured UPS man.
2. In-home business
policy
An
in-home policy covers a broader spectrum of contingencies, including loss of
critical documents or theft of funds being taken to the bank for deposit. An
in-home policy, issued by a home insurer or a specialty firm, usually is a plan
against injury or theft covering as many as three employees, Worters says.
Rates typically run from $250 to $500 and the plans can cover as much as
$10,000 in losses.
Most
serious home-based business owners may want to consider picking up at least an
in-home policy, says Rebekah Marshall, multiproduct insurance manager at the
National Federation of Independent Business. "This covers business
equipment and liability [for injury]," she says. "That's important if
people are coming in and out."
If you're interested in an in-home policy, you’ll need to find one that will
cover your business type in your state. Each state sets its own rules about the
insurance coverage that can be offered to home-based businesses. In general,
given the low coverage amount, purchasers of in-home policies often operate
low-revenue or part-time businesses.
3. Business owner's
policy
Entrepreneurs
who need more than $10,000 of coverage should pay for a business owner's
policy. This comprehensive policy is what brick-and-mortar retailers, among
other businesses, use, Marshall says.
Circumstances
usually covered by this type of plan include 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 a
business interruption in the case of a power outage or a natural disaster. Such
a policy might also protect you when driving a personal vehicle for business
purposes.
This
insurance protects against a higher amount of loss than a homeowner’s policy
rider or an in-home business policy. Videographer Logan Hale, owner of
2-year-old Your Little Film in Los Angeles, paid about $500 for a $2 million
business owner’s policy to cover his $25,000 of equipment against breakdown,
theft or damage. His plan also covers loss or damage to home movies sent to him
by customers, as well as injury or property damage inside a client's home or
public venues. He shopped around a bit before Los Angeles-based Farmers
Insurance agent Rodney Pyle found a specialized policy for videographers, he
says.
"As
I started increasingly going into people’s homes to shoot, it really pushed me
to say ‘2011 is about getting covered,' " he says. “Now I feel so much
safer, knowing I'm not putting my family at risk for a possible lawsuit."
As your company grows, it may require additional coverage not covered by a
business owner's policy, Marshall says, such as life insurance, workers'
compensation, and business-vehicle insurance. But for most small businesses,
the business owner's policy can provide a suitable basic safety net. | 
