First off, congrats! You’ve got a solid business plan in the works — one that you believe in, that’s worth your money and time and begins with your own two hands. What’s left to consider before you start making waves?
Well, the key to any successful business, big or small, is that it’s protected. If something were to happen (and things do happen) — could you cover the costs?
To ensure you’re protected on all sides without spending too much money, here are some insurance considerations to mull over, along with a quick breakdown of some common home business policies.
Talk to Your Home Insurer
Your home insurance likely covers a broad spectrum of perils — including hazards to the house itself and the stuff you keep there, guest medical expenses and your personal liability. In the event of a business-related claim, however, you’ll likely run into complications, since homeowners policies typically don’t insure commercial endeavors.
Now, if yours is a one-person operation, there could be ways to increase your existing home policy to cover your business (but more on that later). In any case, it’s good measure to speak with your insurer so you can be absolutely sure there are no gaps in your coverage.
Take Stock of Your Business Assets
If you have equipment or supplies you use for work, you’ll more than likely need separate business coverage. That’s because a homeowners or renters policy usually limits protection to personal possessions — not business products, intellectual property (client lists, financial records, etc.) or merchandise exclusively related to your venture.
Taking inventory of all of your business-related items will make it that much easier to calculate how much it’ll cost to replace them should something go awry.
Look Into Work-Related Liability Coverage
You’re not just protecting the stuff you keep at home, either. In fact, liability claims can be some of the most expensive claims out there, and homeowners insurance generally won’t cover liability claims related to your business.
If, for instance, an employee or client is injured and decides to sue, you could be held legally liable. That could mean not only substantial medical costs but hefty legal fees as well.
For this reason, worker’s compensation is a must if you have employees. Worker’s comp insures employees who are on the job, providing them with medical coverage and loss-of-income protection — and protects you from being sued after an incident.
Consider Commercial Auto Insurance
In the same way that home insurance doesn’t cover business ventures, auto coverage typically doesn’t protect vehicles used in a commercial capacity. If you use your car as a work vehicle, commercial auto insurance is definitely worth looking into.
Not sure if you need commercial car insurance? Ask yourself the following questions:
- Do I deliver goods, supplies, material, food items or passengers for services?
- Is my car leased by a partnership or corporation?
- Do I rent my car to others?
- Is my car equipped with catering equipment, snowplowing equipment or hydraulic lifts?
- Are ladders, racks or permanent toolboxes used to support my business installed in my vehicle?
If you answered “yes” to any of these, it might behoove you to look into commercial car insurance.
Find the Insurance Option That’s Right for You
There’s no one-size-fits-all business insurance plan. The policy that’s right for your home venture depends on its scale and type — for example, whether you offer at-home services or sell products online.
Once you’ve determined how much it’ll cost to replace all of your company’s belongings, you can start pinpointing which policy best aligns with your needs. Also, most insurers will help you tailor a policy around the specifics of your business.
Here are a few common business insurance plans:
Endorsement of Homeowners Insurance
As mentioned before, if you’re a one-person show, you might be able to increase your existing coverage. This is typically referred to as an “endorsement” to your existing homeowner’s insurance policy and is the least expensive form of business coverage. It’s best suited for those who don’t have the expensive business equipment and rarely have business-related visitors on their premises.
One important reminder, however, is that if someone gets hurt delivering or carrying business materials on your property, home insurance likely won’t step in to cover the damages. In that case, it may still be wise to look into separate business liability coverage.
In-Home Business Insurance
If yours is a smaller operation but entails valuable equipment and liability risks (i.e. visitors or employees on your property), then an in-home business policy might provide the right amount of protection for you. Typically, in-home policies guard against injury and theft for up to three workers and may cover upwards of $10,000 in damages.
Errors & Omissions (E&O) Coverage
Although in-home business policies do often provide liability coverage for injuries, they may not extend to errors and omissions (E&O) coverage, which helps protect businesses and their employees if they’re sued for negligence. This coverage is especially critical if you provide services to customers for a fee.
Business Owners Policy (BOP)
Need more than $10,000 worth of coverage? A BOP might be worth looking into —it’s one of the most extensive plans out there and is designed for larger at-home companies. A BOP typically includes the following:
- Damage to equipment/assets
- Professional liability
- Liability for worker/contractor/client injuries
- Loss of income due to business interruption
Depending on the insurer, it could even cover your personal car if you drive it for business.
Additionally, BOPs usually have higher coverage limits and can be particularly handy if you do business at more than one location.
No Home Business Is Too Small for Protection
Whether you create frilly decoupages, sell organic furniture online or renovate kitchens, it’s important that you find the right coverage for your particular venture. A business policy may not be as expensive as you think and can safeguard you from dire straits down the line.
After all, mishaps are to be expected, but it’s how effectively you respond to them that could make or break your bottom line — no matter how big or small.
Jon Snyder is a Product Manager at Esurance, overseeing countrywide design of property insurance products. Jon has over 25 years of experience in the insurance industry, ranging from product management to design and claims roles. You can view Esurance’s homeowners policies on their website.
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