A new survey commissioned by the Independent Insurance Agents & Brokers of America (IIABA) and conducted by International Communications Research reveals that one in 10 U.S. households operates some type of full or part-time home-based business. However, nearly 60 percent of these businesses do not have any or adequate insurance coverage. When asked about the lack of insurance, nearly 70 percent of the respondents believed their business was too small for insurance or they thought they were protected by their homeowners insurance.
Misconception 1: I Don’t Need Insurance because My Business is Too Small
Most people do not consider their hobby or part-time work from home as a business since it is not their main source of income. Thus, they do not even realize that they need insurance for a home based business. If you answer yes to the following 3 questions, you probably have a home based business along with all the risks and rewards associated with owning a business
– Is it a trade, profession, occupation or hobby
– Is it full-time, part-time or occasional
– Is the activity engaged in for money or any other type of compensation
Misconception 2: Doesn’t My Homeowners Insurance Cover My Home Based Business
Homeowners insurance policies were never intended to cover business exposures. The purpose of the homeowners policy is to protect insureds during personal activities. Neither the coverage nor the premium charged is intended to cover a business activity exposure. Thus, most homeowners insurance policies have very limited coverage for most home-based businesses. Below are the common business coverages and exclusions offered on most PA homeowners insurance policies
– No business liability coverage of any kind –no on-premises liability, no-off premises liability, no products liability, no professional liability, Workers Compensation liability, etc.
– No coverage on any detached structure, for example a shed or garage, if used even partly for to conduct business
– Minimal coverage on business property such as computers, fax machines, filing cabinets, tools and inventory – typically $2,500 in your home and only 10% or $250 away from home
What are My Insurance Options for a Home Based Business?
The insurance solution for a home based business is unique for each situation but most can be protected by using one of the following.
– Incidental Business Endorsement – Depending on the type of business and insurance company, you may be able to add an endorsement to your homeowners insurance to extend liability insurance for your home based business. This coverage usually costs around $30-$50 per year but it only covers on-premises business liability only.
– Businessowners Policy (BOP) – A BOP is a package policy that is designed to provide property and liability coverage for some small businesses. Generally, small businesses whose activities or operations involve processing and/or service are eligible for a BOP. Manufacturers, especially with complex liability issues, are not suited for a BOP. A BOP policy can cost as little as a few hundred dollars and it has several optional coverages that can be tailored to fit an individual business.
– In-Home Business Owner Policy – Some insurance companies offer a policy that combines a homeowner and BOP into a single policy and are designed specifically for home based businesses. The policies eliminate gaps and duplications in coverage and the rates reflect the in-home status of a business.
Don’t Risk A lot For A Little
Millions of Americans are operating a home based business without knowledge that they have little or no insurance protection. In the event of a loss, they could be underinsured or uninsured leaving them personally liable. The solution to reduce or eliminate this potentially devastating risk is simple and can cost as little as $30 per year. Don’t risk a lot for a little!
Are you sure if you are covered by home based business insurance?