TUESDAY, AUGUST 28, 2012
It is estimated that there are as many as 36 million home-based businesses in the United States, and that number is expected to grow rapidly. Whether you are repairing bicycles out of your garage, or running a daycare center in the basement, everyone with - or considering - an in-home business should review the insurance requirements or recommendations to protect themselves and their business.
 While the unemployment numbers continue to rise, many are taking business into their own hands and creating a home-based business as a way to bring in additional income. Unfortunately, the majority of these home-based businesses have little or no insurance coverage. One study found most believe they are covered by homeowners insurance, but 60% of those who work at home do not have insurance for their business activities
A homeowners policy does offer some coverage for home-based business, but it is minimal. Generally, it is a $2,500 maximum for electronics and business equipment such as computers, fax machines, etc. While that may sound sufficient to replace your items, consider the more likely possibility of getting sued because of your home business activities. In that case, you have no protection from your homeowner’s policy. It is estimated that on average, most people are either directly or indirectly involved with a lawsuit at least once in their lifetime, the chances of your house burning down are much smaller.
Further, if you have to temporarily shut down your business for whatever reason, the homeowner’s policy won't allow you to recover the income you lost because of the shutdown.
Fortunately, there are options available to protect small business owners from liability, lost wages and equipment. One common option for home-based business owners is a home office policy, also known as an in-home business policy. The policy provides the standard coverage for homeowners -- including fire, theft and personal liability -- as well as coverage for business property, commercial liability and loss of income. This type of coverage generally runs about $200 a year for $10,000 of coverage for business property. The business liability coverage comes with limits of $300,000 to $1 million. While $300,000 may sound like a lot of insurance, it goes quickly when you consider the cost of attorney fees in today’s world.
The amount of business insurance necessary depends on the type of business. For home businesses such as eBay sellers that require little to no customer interaction and are selling products rather than manufacturing, the required coverage may be minimal. If you have customers coming into your home often, if you are providing goods or services, if you are dealing with children or heavy equipment, you need more coverage than you think.
The most extensive coverage for home-based businesses is available in a business owner's policy, which insurance people call a BOP. This type of insurance is substantially more coverage than a basic home office policy. For business owners who stock a lot of inventory, manufacture fairly complex products or provide professional services where there is a significant risk of being sued by disgruntled customers, a BOP probably is the best option. These policies run from $150 to more than $1,000 annually.
It is important for business owners to review their homeowners or business policy annually and keep it up to date with the rate of growth of the business to ensure they are always adequately covered.
By Matt Reynolds - Google+
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