How to Adjust Home Insurance for Your Home-Based Business

Standard Homeowners Insurance Provides Limited Coverage for Home-Based Businesses

If you have a home-based business, then you may need additional insurance beyond an ordinary homeowners policy.

A standard homeowners insurance policy provides limited coverage for home-based businesses. Your homeowners insurance policy may cover some parts of your home-based business – but not all. Plus, your homeowners insurance limits may be too low to cover your home-based business.

Here’s how a standard homeowners insurance policy may or may not cover your home-based business:

• Homeowners insurance typically includes personal property coverage, which covers your possessions – like your couch, TV, and jewelry.
• Depending on your policy and insurer, your personal property coverage may not extend to property owned by your home-based business – like a computer or other equipment specifically used for your home-based business.
• Even if your homeowners insurance policy does extend to cover personal property for your home-based business, your limits may not be high enough to cover all business inventory.
• Some homeowners insurance policies only offer $1,000 for business property coverage, for example, which may not be enough to cover your home-based business.
• Additionally, your homeowners insurance policy is unlikely to cover business property away from your home – like equipment or inventory not stored in your house.

Because of these drawbacks, you may need additional coverage for your home-based business.

How to Insure a Home-Based Business

Fortunately, there are multiple easy ways to insure a home-based business.

Depending on the size and scale of your home-based business, you may want to choose one of the following options:

Option #1: Add Optional Business Property Coverage to Your Homeowners Insurance

The easiest way to cover a small home-based business is to add business property coverage to your existing homeowners insurance policy.

According to the Insurance Information Institute (III), most insurers allow you to add up to $10,000 of business property coverage to your policy. If a house fire burns $10,000 worth of equipment and inventory for your home-based business, then insurance should cover it.

Pros

• Affordable way to cover a home-based business
• Easy with no additional policy or insurer required

Cons

• May only have a $10,000 limit
• May have restrictions on the type of business property covered
• No liability coverage

Option #2: Buy a Separate In-Home Business Policy

Another option is to buy a separate policy or endorsement for in-home business. This is more appropriate for medium-sized home-based businesses.
With a separate in-home business policy, you typically get higher coverage limits along with liability coverage, reimbursement for lost income, and other coverages not typically seen in the first option above – like coverage for inventory stored away from home.

Pros

• Higher coverage limits
• Easier and more affordable than a full business owners policy
• Includes liability coverage
• Includes reimbursement for lost income
• Covers materials, equipment, and inventory stored away from home

Cons

• Not offered by all insurers
• May require a separate policy

Option #3: Buy a Full Business Owners Policy

If you have a medium or large home-based business, then consider buying a full business owners policy, or BOP.

Insurers offer BOPs as a package of insurance products. You get multiple insurance products important for small and medium-sized businesses (SMBs) at a competitive price.

A standard BOP includes property coverage, liability coverage, and other insurance coverages.

Pros

• Broader protection than the endorsements above
• Includes liability coverage, business interruption insurance, and other coverages
• Covers business property stored outside of the home

Cons

• More expensive
• More coverage than some small home-based businesses need

Other Types of Insurance Coverage for Your Home-Based Business

The insurance coverages above apply to many small and medium-sized businesses.

Depending on your business and the industry where you work, however, you may need other types of insurance coverage, including:

• Commercial umbrella insurance
• Cyber liability insurance
• Workers compensation insurance
• Professional liability insurance
• Errors & omissions insurance
• Commercial auto insurance
• Business interruption coverage

Talk to your insurer to determine if these coverages are already part of your policy – or if you can add them to your existing policy.

Other Things You Need to Know About Insuring a Home-Based Business

Insurers make it easy to insure a home-based business. In fact, roughly 50% of America’s businesses are operated from a home, making home-based business insurance one of the most popular types of insurance.

Other things you need to know about insuring a home-based business include:

1. Homeowners Insurance May Not Cover Digital Records: Do you store records, customer data, and other information for your home-based business at home? Whether stored offline or in the cloud, you may need additional coverage to protect this data and compensate you for its potential loss.
2. Rules Change If Employees or Customers Visit Your House for Business: Do employees or customers visit your home to conduct business? If so, your homeowners insurance doesn’t cover the liability of these individuals while they’re on your premises. If a customer slips on your icy sidewalk, for example, while walking into your house for a meeting, then you could face a costly lawsuit.
3. Contact Your Insurer to Explore Options: If you’re happy with your insurer, then call your insurer to explore your home-based business insurance options. You may be able to add complete coverage for your business for just a few extra dollars per month. In many cases, you can avoid buying a separate policy or dealing with another insurer.
4. Check Zoning Laws, Licenses, & Permits: Depending on the nature of your home-based business, you may need to consider zoning laws, licenses, and permits. Check local and state laws to verify any requirements.
   Adjust Auto Insurance: Homeowners insurance does not cover vehicles – either personal or business vehicles. Instead, you work with your auto insurer for vehicle coverage. If you use your vehicle for business, you may need to adjust your auto insurance policy.

Consider a Public Adjuster for Complicated or Expensive Home-Based Business Insurance Claims

Home-based business insurance claims can get complicated.

What happens if you use your computer for business only 50% of the time? How does insurance cover inventory stored off-site? What happens if an employee visits your house on an off-day and gets into an accident?

For tricky insurance claims, consider working with a public adjuster.

Public adjusters are insurance industry professionals who represent policyholders – including small and medium-sized business owners like you.

Public adjusters know the strategies insurers use to reduce payout and deny claims. They also know how to avoid these strategies to help you get the payout you deserve.

For a no-cost consultation with a public adjuster in your area specializing in home-based business insurance claims, contact ClaimsMate today.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.