Home-based business operations often pose problems for owners and their home insurance policy. Is your business covered under your homeowner’s policy? Do you need a separate policy to protect the business? Is there a “combination” policy available which might cover your home and the business? Have you talked to your insurance agent or broker about coverage?

According to the U.S. Small Business Administration, “more than half of all U.S. businesses are based out of an owner’s home." Many entrepreneurs enjoy the benefit of having a home-based business as it provides flexibility of working hours, eliminates a commute, and reduces overhead costs. Home-based business range from crafters to consultants and encompass a large percentage of the working population.

Four specific questions about home-based business operations and insurance:

1.) Do you need additional coverage for business property over and above the amount provided by your homeowner’s policy?

While there are no “standard” home insurance policies in the United States, the Insurance Services Office (ISO) forms are widely used. The ISO Homeowner’s Series (HO2010) has a maximum coverage of $2,500 on property used “primarily” for business purposes at your residence premises. While this property is not specifically defined in the policy, items would include furniture, inventory, office type machines, specialized business clothing and tools, as well as business supplies such as paper and shipping boxes.

2.) Do you have a substantial amount of business records/data stored at your primary residence?

This could include maps and drawings, as well as computer software. If so, this is a real problem. Your homeowner’s policy does not provide enough coverage, if any! Better talk to your insurance agent or broker.

3.) Do employees or customers come to your home to conduct business?

If this is the case, your homeowner’s policy does not provide ANY coverage for you! Homeowner’s polices are not intended to provide coverage for third party injuries related to your home-based business operations. (Note: The ISO policy affords some liability coverage for very limited business exposures such as renting out space in your home for an office/apartment to another party). If an employee or customer of your business comes to your home for a commercial purpose, and falls on an icy sidewalk, that is NOT covered by your homeowner’s policy.

4.) Do you need specific coverage for your home-based business operations?

Talk to your insurance agent or broker to discuss any of the following exposures:

Business Income Coverage
Liability Insurance
Worker’s Compensation Coverage
Business property or inventory stored at your home
Specialized business property

An at-home business can be an entrepreneur’s dream, if properly insured. Be sure to talk to your insurance agent or broker about your concerns and eliminate unnecessary risks to keep your business running as best as possible.

One final thought, before you open any type of business in your home, check with your local Codes Department. They can tell you if the business you wish to operate would be allowed under the local/state regulations. Better to be safe than bankrupt!

Other interesting topics include:

1.) Do you need additional coverage for business property over and above the amount provided by your homeowner’s policy?

2.) Do you have a substantial amount of business records/data stored at your primary residence?

3.) Do employees or customers come to your home to conduct business?

4.) Do you need specific coverage for your home-based business operations?

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