There has never been a better time to start a part-time, home-based business than now. Jobs ranging from IT consultant to Uber driver are just two examples of the numerous opportunities to earn money from home or in your spare time.
According to 2020 U.S. Census Bureau data, there are over 60 million non-employer firms (those who work from home full- or part-time) in the United States.
Working from home has many advantages, but it also has some drawbacks.
If you run a home-based business, don't make the mistake of assuming your personal insurance policies will cover you adequately. Your current policies may not provide adequate coverage for you and your business operations. Just because you have a part-time business does not mean you are risk-free.
Here are some things that any home-based business owner should think about:
Insurance for Real Estate
If you have homeowner's or renter's insurance, most policies limit coverage to $2,500 for business property located at the insured's residence and $500 for property located away from the insured premises.
This amount of coverage may be sufficient for a freelance technical writer or marketing consultant who works primarily from home and whose primary business equipment is their computer and cell phone. However, it may not be sufficient for someone who meets with clients away from home, bringing their laptop, LCD projector, and other equipment with them.
Another factor to consider is where you will keep your business property in the first place. The business property limit usually applies to your home, which is also known as "residence premises." Business property kept in a separate structure, such as a workshop or detached garage, may be excluded entirely.
For example, there would be a coverage gap for someone who builds cabinets in a workshop. Their tools and supplies would not be covered.
Depending on your circumstances, you may be able to obtain the necessary coverage for your commercial property by adding a business property endorsement to your homeowner's insurance policy or by purchasing a commercial property policy.
Liability Insurance
Liability coverage protects you from bodily injury or property damage claims made by others against you. Your homeowner's policy does not cover liability arising from your business activities.
For example, if you had customers visit your home and they were injured on your property, your homeowner's policy would not cover the injuries.
Another potential source of liability is someone being harmed or injured by your product. A person who makes toys for children and sells them at craft fairs, for example, may have a problem if a child chokes on the toy.
Commercial general liability insurance will protect you against these types of claims.
Professional Responsibility
Another potential issue for part-time home-based business owners is liability arising from their professional advice. A person who does bookkeeping from home may inadvertently make a mistake, resulting in a large IRS fine. This is not covered under commercial general liability insurance.
A professional liability policy, such as errors and omissions, protects you if you provide or fail to provide services.
When it comes to insuring a home-based business, there are numerous factors to consider. Many of our clients are often surprised at how inexpensively they can obtain the coverage they require to protect their personal assets. Contact us today for a quote!