Large companies only make up 0.10% of United States’ business profile. That’s not a typo – they are, in fact, less than one percent of the market!
That’s because small businesses comprise a whopping 99.9% of all businesses in the country. Their count is now at 30.2 million, employing almost half of the U.S. workforce.
What’s even more impressive is that 69% of these businesses started at home. So, if you’re thinking of starting a business at home, then let us congratulate and thank you in advance!
But we’d also like to give you an advice. Home based business insurance is crucial to the success of your startup.
Now, don’t think that it’s the same as your homeowner’s insurance. They share similarities, but they’re two different things. We’ll cover everything you need to know in this post, so you can launch your business off on the right foot!
Home Insurance vs. Home Based Business Insurance
As of the second quarter of 2018, homeownership rate in the U.S. was at 64.4%. That means homeowners own almost 88 million of the country’s 136.57 million housing units.
Combined, the value of these housing units is now at $31.8 trillion. Doing the Math, it means the average value of a U.S. home today is around $230,000.
With that kind of money on the line, there’s no doubting the importance of homeowners insurance.
After all, it provides coverage for damages and losses not only to the house itself but also its contents. In short, this policy protects your home’s structure and your valuables.
Most basic homeowners insurance cover fire, smoke, wind, hail, and lightning damages. That applies to the main house itself, as well as other structures on your property, like a garage. The same goes true if these events damaged your furniture, electronics, or clothing.
It also safeguards you from liabilities, such as if an accident occurs in your home or on your property. Say you had a guest who slipped, fell, and sustained an injury while in your home. Your homeowner’s liability coverage will cover your visitor’s medical bills.
So, if your policy already covers you for these, what’s the need for home business insurance? The simple answer is that your home insurance doesn’t cover business activities. Even if you conducted such activities at the comfort of your own home.
In fact, some home-based business activities can void your homeowner’s policy! If you use your home for purposes other than as a dwelling, you need to tell your home insurance provider. Then, you have to take out a separate insurance for home business.
The Most Basic but Also Your Top Priority: Business Property Insurance
To , know your priorities, including protecting your business’ assets. Your home insurance may cover damage, loss, or theft of your personal property. The keyword here is “personal”, which means it may not cover your business property.
Some homeowner’s policies may cover some home business equipment. But many of them still have a content limit that pricey business equipment can exceed. You can read more here to learn of these inclusions and limits.
So, even if you started your , the stuff you use, like your PC, laptop, and printer, are costly. If they get lost, stolen, or damaged, that can mean pricey repairs or replacement. Even the most affordable (but reliable) PCs that rolled out this year already cost $375 to $550.
What’s more, those three are only a few of the many other you use for your business. You most likely also use a separate cellphone and tablet for business transactions. Don’t forget other electronics, like modems and routers, and your home office furniture.
As you can see, there’s a lot at risk if you don’t get a business property insurance policy. So, as early as now, conduct a thorough inventory. Make a list of everything you use for your business and get them insured.
Contents and Property Insurance for Assets You Use Outside Your Home Office
You may have set up shop at your home, but it’s possible you still take some of your business equipment out of it. This is especially true for cell phones, tablets, and laptops. If you have a portable printer, that’s another thing you often bring with you outside of your home.
In this case, you need to get a separate coverage for them. Many insurers offer specific contents and property coverage plans for such items.
Liability Coverage Based on the Nature of Your Business
For businesses, liability coverage may include general, professional, or product liability insurance. Which of these three you need depends on the exact nature of your business.
Not all businesses need all three. But you may need general plus either professional or product liability.
General Liability
Your homeowner’s insurance policy comes with liability coverage. But again, that’s only for injuries or property damage others sustain while in your home. Your home is separate from your business, even if you run the latter out of your home.
Let’s say a TV cable or satellite technician went to your house to fix your connection. He fell and broke an arm because part of your roof or floor was already rotting.
Under , his worker’s compensation should cover his medical bills. Your home’s liability coverage may also kick in, protecting both him and you.
It’s a different story if a person was at your home for purposes relating to your business. An example is a technician for your commercial or business phone service. If the technician gets into an accident, your homeowners’ liability may not cover it.
Your home liability coverage also won’t cover clients and employees. In fact, it won’t cover anyone else who gets into an accident while at your home business or on its premises.
That’s why you should buy extra general liability coverage for your home business. This way, you can protect yourself and everyone who’ll do business with you.
Professional Liability
For home-based businesses providing services, professional liability coverage is a must. This protects you and your customers from various incidents like neglect or malpractice. FYI, the U.S. sees over 17,000 malpractice lawsuits every year.
True, the majority of these cases are against doctors or health care professionals. But anyone who provides any kind of service, even from their own homes, are at risk. That includes businesses providing food and beverage, spa, or animal care services.
This liability insurance protects you and your assets from such lawsuits. It’ll cover you in case a customer sues you. For instance, they claim your actions as a service provider led to them suffering damages.
It also serves as a protection for your clients. This coverage ensures they’ll receive adequate compensation for the damages they suffer from.
Product Liability
Product liability insurance for business is much like professional liability coverage. The main difference is that this one covers business providing goods and products. It protects against lawsuits claiming of nonperformance or dangers of sold items.
A Separate Insurance for Your Business or Commercial Vehicle
If the business you operate out of your home relies on a vehicle, then you’ll need this coverage. A good example is if you use a car to make deliveries to your clients. Remember, auto insurance is mandatory in all states other than New Hampshire.
By having your business vehicle insured, you can stay on the good side of road laws. It also safeguards you from the financial consequences of getting into a car crash. But the most important thing is that it protects other people if you’re liable of the accident.
Keep in mind that in 2017, road crashes claimed over 40,000 lives in the country. The year before that, it was even higher. That should be enough to make you realize how crucial it is to have your business car insured.
Business Interruption Insurance to Cover Profit Loss
If a disaster, such as a fire, occurs at your home business, you may have to put business activities on hold. The same goes true for flooding or serious storm damage.
In any case, having to close your business (even if only on a temporary basis) means loss of profits.
Protect yourself from such losses with a business interruption insurance policy. This’ll help cover revenue losses in such cases.
Insuring Your Home-Based Business for Peace of Mind
As you can see, home based business insurance allows you to run your business with fewer worries. It protects everyone and everything connected to your profit-making venture. That said, it’s best you look at it with the same value as your homeowner’s insurance.
Keep in mind that only half of small businesses get to celebrate their fifth anniversary. There are many reasons for failure, and lack of business insurance is one of them. Prevent this and instead, climb your way to success with adequate coverage.
Need help hiring your first set of employees? If so, then feel free to check out our extensive collection of !
