What Kind of Home-Based Business Insurance Do You Need?

Being a home-based business owner is a wonderful way to shorten your commute, see more of your family and make your life easier. However, when you run a home-based business, don’t make the common mistake I see too many entrepreneurs make and assume that your homeowners’ insurance equals home-based business insurance, too.

Most homeowners’ insurance policies do not cover businesses operated at home. If a fire burns down your house or some other disaster strikes and you lose your computers, printer, inventory and other business equipment (not to mention your home office itself and all the furniture), you won’t have any recourse from the insurance company.

Here are some types of home-based business insurance you may need and should consider if you’re running a business from home.

Property coverage: A policy that covers your business property will protect you against theft of, loss or damage to your business equipment, inventory, supplies, furniture and other property owned by your business. Policies exist that let you get cash value for the items or replace them with up-to-date models at current cost.

General liability coverage: This covers you against many types of liability, including on-premises liability in case a customer, client or vendor somehow is injured on your property. For example, suppose you run an accounting firm from your home and a client trips and falls while visiting you to discuss his taxes. Conversely, it also protects your client if you or your employees damage anything in the client’s office or home when you’re doing business. Product liability, which is often included in general liability, protects against claims arising if a customer is injured by a product you make or sell.

Errors and omissions (E&O) coverage: Also known as professional liability coverage, E&O insurance protects you against claims arising from errors that you or an employee might make. It’s typically used by service businesses. Again using the accounting example, if the accountant made an addition error that resulted in a client underpaying taxes and the client sued as a result, this type of coverage can protect the accountantIf you need to protect yourself from lawsuits relating to the services you provide, this type of policy (also called professional liability insurance) can protect you from if you are taken to court by a dissatisfied customer.

The right type of home-based business insurance depends on your business and customers. For instance, if you run an entirely virtual business using just a computer and some basic office equipment, never have business-related deliveries to the home and never have clients come to your home, you may be able to get buy with a rider to your homeowners’ policy. If your business involves employees or clients coming to your home, has lots of valuable equipment or inventory, or sells products or services that could conceivably lead to lawsuits, you should investigate purchasing more comprehensive insurance.

Talk to a qualified insurance agent about your options and make sure to get the coverage you need. You can’t be too safe when it comes to protecting your home and business.