Updated: Nov 3, 2021
If you work out of your home - whether a side hustle or a full-time job- it is important to ensure your business is properly insured.
52 percent of the more than 28 million small businesses in the U.S. operate mostly out of a home, according to the Small Business Administration. And about 60 percent of those home businesses don't have insurance or don't have enough, according to a guide from the nonprofit consumer advocacy group Consumer Action.
“About 60 percent of home businesses don't have insurance or don't have enough.”
How to properly insure your home-based business
What do you need to think about in terms of insurance if you have a home-based business? Insurance Services of New Mexico recommends three major categories to consider.
How much are your business assets worth? A photographer might carry $5,000 worth of cameras and lenses, or a computer programmer might have $10,000 worth of computers sitting in a home office.
Keep in mind most home insurance policies only cover damage to property up to about $2,500, leaving a large gap should anything happen to your equipment.
If a client trips and falls on your property or someone gets hurt while using your product, you could face an insurance claim or lawsuit. Most home insurance policies don't cover business liability.
Risks specific to your business.
Are you an attorney, financial planner, or even a cosmetologist? Professional liability insurance, in example, can protect a business owner who gives incorrect or misleading advice that leads to a loss.
Types of insurance for your home-based business
So, what kind of insurance do you need for your business? Take into account specific factors of your home-based business- whether you do your business on the side or full time, how much money you earn, the type of business, and whether customers come to your home.
In general, there are three main options:
Add your business to your home insurance policy.
For a very small business (bringing in less than $5,000 annually) you might be able to buy an endorsement to your home insurance policy. It could cost less than $100 per year to add business coverage to your home insurance policy.
Get an in-home business policy.
An in-home business policy can cost as little as $200 a year and will cover business equipment, general liability and lost income if you're temporarily unable to operate your business because of damage to your home.
With this type of policy, you can insure your business property and buy liability coverage.
Buy a business owners' package policy.
If your home business is full time, brings in a lot of revenue and you have clients visiting your home, we recommend you look into a business owner's package policy, aka BOP.
A larger business such as a bakery or CPA might want to consider a BOP which can cover businesses with sales up to $3 million and cover your equipment and liability. The cost will vary according to the complexity of the policy