Running a small business from home offers flexibility and lower overhead, but don’t assume your homeowners’ insurance will protect your work setup. Whether you’re baking custom cakes in your kitchen or consulting clients via Zoom, a standard policy won’t cover most business-related risks. To truly protect your business, you’ll need tailored home-based business insurance that addresses everything from liability to equipment and income protection. Here’s what you need to know about insurance requirements for home-based businesses.
Why Homeowners Insurance Isn’t Enough
While homeowners’ insurance covers personal property and liability, it rarely includes coverage for business equipment and liability. If a client gets hurt on your property or a power surge fries your computer, you could be on the hook.
Even worse, filing a business-related claim under a homeowners policy may result in denial or cancellation of the policy altogether.
That’s why it’s so important to make sure your business has the right protection in place, whether that means specialized endorsements or a standalone small business insurance plan.
Core Insurance Policies to Consider
The right coverage depends on the type of business you operate, but most business owners working from home should explore the following:
1. General Liability Coverage
This protects against third-party medical bills, property damage, or legal claims. If a delivery person slips on your porch or a product causes harm, general liability coverage can help cover the costs of lawsuits, settlements, and defense fees.
2. Business Property Insurance
Unlike homeowners’ coverage, this policy protects business property, such as computers, inventory, tools, or supplies, if they’re damaged or stolen. It may also cover repairs or replacements due to fire, theft, or natural disasters.
3. Professional Liability Insurance
Also known as errors and omissions (E&O) coverage, this protection helps if a client claims that your service or advice caused them harm. If you’re a consultant, designer, or service provider, this can be essential in handling legal claims.
4. Workers’ Compensation Insurance
If you hire employees, even part-time, you may be legally required to carry workers’ compensation insurance, which covers work-related injuries and lost wages.
Additional Insurance Options as Your Business Grows
Beyond the foundational policies, other types of business insurance can offer added peace of mind, especially as your operations expand. As your business grows, your risks evolve. That’s why many home-based business owners need additional insurance coverage beyond the basics.
- Business interruption insurance: Helps replace lost income if you can’t operate due to a covered event.
- Commercial auto insurance: If you use a vehicle for business, even occasionally, your auto insurance may need to be upgraded.
- Cyber liability insurance: If you store client information digitally, cyber coverage can protect against hacks and data breaches.
The best approach is to speak with an experienced insurance agent who understands your unique operation and can tailor coverage accordingly.
Common Mistakes to Avoid
Even with the right intentions, many home-based business owners overlook essential details when it comes to insurance. These common missteps can lead to gaps in coverage or unexpected claim denials. Here are some key mistakes to watch out for:
- Relying on personal policies: As mentioned, your homeowners insurance and personal auto insurance won’t cover most business-related claims.
- Underestimating property value: Make sure your property insurance reflects the actual value of your gear, especially if it’s specialized.
- Skipping professional advice: A quick online quote might seem easy, but working with a real insurance company ensures your coverage actually fits.
Whether you’re freelancing, crafting, consulting, or shipping products from your garage, the right home-based business insurance is essential. It’s about more than checking a box; it’s about securing peace of mind that your work, income, and reputation are protected.
Ready to protect your business?
At Masters Insurance, we help business owners navigate the risks of working from home with policies designed to evolve as their business grows. Because when you’re building something from the ground up, protecting it shouldn’t be an afterthought. Reach out today for expert guidance and a custom insurance plan that protects what you’ve worked hard to build.