Over the years, the number of home-based startup businesses has grown. According to the Small Business Association, about half of small businesses in the U.S. are run from home. And during the pandemic, the country saw a record number of new businesses starting.
Data from the U.S. Census Bureau revealed that the third quarter of 2020 saw the start of more new businesses in the country than in any other quarter in history, with more than 1.3 million new businesses.
If you’re one of these new entrepreneurs with a home-based startup, one of the things you may have pondered about is getting business insurance.
Owning a business, just like owning a house, is a big responsibility that comes with many risks. And just like how you would protect your house with homeowners insurance that offers coverage for damage from fire, windstorms, and hail, you also need to get your business covered.
But what if your business and your house are in the same place?
Do you need business insurance coverage for your home-based business?
Neither homeowners’ nor renters’ insurance cover home-based businesses. So, if you run a business out of your home, it’s important to get a separate insurance policy that will cover your business-related assets.
Generally, there are three types of insurance policies you can get for your home-based startup: homeowners policy endorsements, in-home business policy, or business owners policy.
Homeowners Policy Endorsements
The standard homeowner’s insurance policy provides coverage for personal devices like laptops and desktop computers. However, most policies put a limit on how much they will cover devices used for work, which is usually capped at $2,500.
If you have more than one piece of work equipment at home, it’s best to add endorsements to your standard homeowner’s insurance policy. Endorsements extend proper coverage to your work equipment in case of a disaster.
Equipment breakdown coverage is the right endorsement for insuring devices in your home. Among the equipment it covers are:
- Washers and dryers
- Refrigerators and freezers
- Ovens and microwaves
- Heating and air conditioning systems
As such, even businesses that provide food and other services can get their equipment covered. With this endorsement in your homeowner’s insurance policy, your equipment coverage goes from $2,500 to up to $50,000.
In-Home Business Policy
If you want more comprehensive coverage for your business assets at home, an in-home business policy can provide that.
The coverage varies depending on the insurer, but in-home business policies provide business property and general liability coverages for your business. It can also reimburse you for the loss of business income, valuable papers, and accounts receivables.
Since the coverage differs with every provider, make sure to thoroughly review what your insurer does and doesn’t cover with their in-home business policy.
Business Owners Policy
Created specifically for small to medium-sized businesses, a business owners policy combines protection for major property and liability risks in one insurance package. The bundle of coverages is sold at monthly premiums that cost less than the sum of individual coverages.
Like an in-home business policy, a business owners policy or BOP provides coverage for business property, loss of income, and liabilities. The difference is that a BOP’s coverage is on a much broader scale. You can also opt-in for additional coverage, including crime and merchandise spoilage.
While BOP is an affordable way to get comprehensive coverage, insurance providers only grant them to businesses that qualify for certain criteria. The eligibility varies depending on the provider, but insurance companies usually consider the business location, its size, and the revenue.
It’s perfect for home-based businesses because apartment buildings are one of the business classes eligible for BOPs.
Keep in mind, though, that a BOP does not include coverage for worker’s compensation, professional liability, and disability insurance so you’d need separate policies for them.
Other Insurance Policies to Consider
While the three types of insurance policies mentioned above provide most home-based businesses with the coverage they need, entrepreneurs still have other options to consider to insure their business against other risks.
Commercial Auto Insurance
If you use a vehicle registered to your business, it’s crucial to have commercial auto insurance. This protects not just business-use vehicles, but also employees’ cars used in operation.
If you run an accounting, law, or consulting business from your home, professional liability coverage will protect you from third-party claims for financial losses that resulted from errors you may java made while serving clients.
Workers’ Compensation Insurance
If you employ one or more workers, your state’s compensation laws most likely require you to purchase workers’ compensation.
No matter where you’re operating your business, getting it insured is the best way to protect it from financial risks in case of disaster. Consult with a professional for more information regarding insurance for home-based businesses.