I Run My Business Out Of My Home, Do I Need To Carry Business Insurance?

Sep 22, 2020 | Business Insurance

INSURANCE FOR SMALL HOME-BASED BUSINESS:

What are the odds that you can be hit by lightning, or win the lottery? It turns out getting hit by lightning is more possible than winning the lottery fortune. What would you do, then, if you are a small business owner and either of the two happens to you?

Let’s be honest: opening a business is a gamble, or at least it might feel like one, what with the promising success and the risks having to be taken to get there.

It shouldn’t have to be that way; because that is what insurances are for. As long as risks in the enterprise you are approaching exist, getting insurances to cover for them shouldn’t be questioned. 

Twice the Risks, Twice the Need

Setting a backup is always an indispensable requirement when it comes to venturing and opening businesses, especially when they are home-based, since, no matter what products or services are going to be sold, the owner’s place of business is now being used both for work and private quarters, thus exposing it to two times more susceptibilities than it could be riddled with before.

A full, complete package specifically for home-based business insurances isn’t always available, but there is always an option to customize your business insurance quotes, or even avail other complete insurance policy groups that can act as an umbrella and include almost everything you’ll have to cover for. 

All you’ll have to do is to know what you are insuring, why they should be insured, and through what insurance policy they could be covered with.

1) Business Property

which are:

  • Equipment you use to run your business
  • The vehicle you use for your business
  • Stock/ Inventory
  • Your place of operations (as well as your home)
  • *Or any properties you use to operate your home-run business
2) Business products
  • Products you sell in your business
  • The services your business offers
3) Hired Help
  • Employees
4) Personal Property
  • Your home
  • Your home equipment that’s not for commercial use
  • Or, any personal properties that might be affected once you run your home business

So, item number one: The business properties. Why insure them?

  • Future damages (Specifically, equipment break-down coverage)
  • Repairing/ replacement costs in the future
  • Utility services’ failure, as well as damage

All are just a few of the many risks you’ll have to prepare for. How, then, can we insure against the aforementioned?

Commercial General Liability Insurance

First of all, we must understand that liability insurance or third-party insurance will cover for the insured against claims of injuries and damage to people and/or the property. It will cover both legal costs as well as payouts for which the insured can be found legally responsible.

This is a must-have, but one insurance plan does not cover for all. 

You will have to be more specific if you plan to insure for a home-run business; After all, Commercial General Liability Insurance, as it is general, will probably not include the fine-tuned necessities the diversity in the enterprise would require. You, therefore, will need:

Commercial Property Insurance

Whereas, your business properties will be covered in case of the need for repair for damages, as well as funding for the heavy costs including:

  • Your home (Since it will technically be a commercial place or your place of operations)
  • Your equipment
  • Your inventory items

All of that, among others, as long as those properties are being used commercially.

We can also adjust some conditions so as to cover all commercial property that is susceptible to damage in the future.

Commercial Property Insurance will cover for you in case of instances wherein your commercial property would need financial backing, including the possible damage and repair costs that without the insurance would’ve been a nightmare for both you and your finances.

Commercial Auto Insurance

You’ll need this when your home-based business includes a vehicle in its operating tools. Not to be mistaken with the personal auto insurance, Commercial Auto Insurance is more inclined to protect you against heavy costs when it comes to your commercial vehicle, particularly to any accidents or liabilities your vehicle might be held accountable, for which costs might extend to and affect your running business as a whole. Even if you are home-based, when you do have to use a vehicle, make sure to be covered for all the risks it might pose.

Of course, insurance should also cover for your enterprise’s merchandise or products.

Number two on the things you need to run a home-based business, there is the enterprise products, which are the following:

  • Products that you sell in your business
  • The services that your business offers

Why should we cover them? So that, under any circumstances customers decide to sue you for any injuries or damages from your product and/or service might have inflicted, we could get you covered in the expenses of possible compensations or lawsuits. Here, we have two general options to have you started:

Business Liability Insurance

This insures for possible lawsuits regarding four scenarios in liabilities, which include business, professional and public or personal liabilities. 

For example, Mr. A complained about getting injured after hiring your cleaning services for his home. Apparently, he suffered from a bad fall because the floor became too slippery after the clean-up (yes, this may be an extreme example but we are preparing for the worst, aren’t we?). 

Or Ms. B apparently had a case of the bad stomach after eating a pie ordered from your kitchen.  What would happen then? With Business Liability Insurance, any costs for customer compensation, among others, will be covered. There would be no need for any hassle because you know that you are already protected by this insurance. 

Errors and Omissions Insurance

This, in particular, is an indispensable aspect if your enterprise works for the service sector.

Say, you are running a home-based café, and one of your employees accidentally spilled scalding hot coffee on one of your customers. If the customer sustains an injury, which they will surely do, and then they decide to sue you for it. Their hospitalization, lawsuit and any other costs will be covered if you have this insurance policy prepared beforehand.

This means that should an employee commit a mistake in their service (such as negligent acts, errors during business) and the client decides to file a complaint or a lawsuit, your expenses for such will be insured.

Clerical errors or mishaps with employees, as well as human errors, are what this insurance covers.  

From here, we approach the insurance must-haves for when you have hired hands.

Employees are an important part of the business, as they are the workers themselves that help to keep your business up and running. They maintain your services and are the front lines when it comes to first-hand operation of the enterprise.

From hired cleaners to cashiers, among others, there will be a circumstance where they will get injured, depending on their line of work. Why wait for accidents to happen, when you can guarantee compensation in advance? There will come a time when you’ll have to pay for hospitalization costs or give financial backing for the aftermath.  

Having an Errors and Omissions Insurance coverage is like getting a risk management plan which big businesses normally have, that, unfortunately, many small, home-based business owners do not have.

Worker’s Compensation

This is a crucial part of maintaining your services unless you don’t need extra help for your business.

Either way, when it comes to hiring extra people, make sure that their compensations are on standby. What better way is there to be sure than setting up a nice coverage in their insurance plans?

Worker’s Compensation is often mandatory, depending on your state’s ordinances for hiring employees. However, wouldn’t it be better to be safe than sorry?

This insurance type covers the following:

  • Medical costs for injuries sustained at work
  • Funeral expenses, for in case a worker is killed on the job
  • Death benefits for the deceased’s immediate family
  • Wages missed during absence *often partial
  • Employees’ lawsuits for injury

Depending on their duty or line of work, it is only appropriate to be at the ready should an accident happen while they are working. This avoids having filed lawsuits to answer to, and assures that your employees have appropriate healthcare should anything happen to them while at work.

Now, we have arrived at the discussion of personal properties.

What falls under the category of personal properties?

Basically, anything you own that isn’t intended for commercial use. 

Imagine you are currently going home, but then arrive only to find out that half of your house is badly damaged after a fire from the burning stove you forgot to turn off. What’s worse is that it wasn’t caused by the small section of your house where you run your home-based business, so you can’t use your property insurance since it is specifically for commercial purposes. 

If you have personal property insurance, there would be no problem in filing claims and financing the repairs. What could’ve happened had you forgotten to take up separate insurance for your personal quarters that can and will definitely be avoided.

Homeowner’s business insurance policies aren’t always stretched out far enough to include business property damages into their coverage, and vice versa. Business insurance policies typically don’t include personal property damage, especially in-home business circumstances.

Why should you avail of these if some items are already covered by your existing insurance?

Well, you’ll never know. And just in case, of course, it is better to have insurance at the ready than having to be stuck with property damages that could, later on, turn out to be not included in the coverage of your previous insurance plans, and because commercial property coverages aren’t often interchangeable with your personal property.

We might as well remember that there are twice the risks for such, as we are discussing insuring your living quarters and your base of operations all-in-one.

Since we are looking for insurance that should cover nicely for home-based businesses, what insurances are we looking to avail? Here are some of the essentials:

Personal Auto Insurance

As this is different from the Commercial Auto Insurance, you should know why should get one:

There might be specifications on the instances or accidents your CAI is covering for, one of them stating that the coverage would only be provided should the accident/ damaging instance happen during commercial use.

What would happen, then, if the damage didn’t happen during commercial use? Rather than being left to costly repairs, it would surely be a lot better if this instance has been already prepared for.

Personal Auto Insurance usually covers for these; Collision, in the event that your car is damaged by collision; Comprehensive, for when your car is damaged by anything else other than a collision and then there’s Liability, for when the incident happens at your fault.

Home Insurance

Let’s get back to the story wherein your stove in the private sections of your house has burned out that part.  Certainly, the Commercial Properties Insurance cannot cover that, because the damages weren’t to the parts of your house you have reserved for your commercial, home-based business use.

Under any situation your commercial property coverage can’t be held accountable for any personal property damage, Home Insurance has your back.

Setting specific conditions for your home insurance coverage is certainly a must so that no risks are left unattended when the time of any accident comes. If you have already covered for commercial purposes, why leave a weak spot open if you might as well just secure it?

Home Insurance covers for any areas your Commercial Property Insurance might not cover for, which are any of your properties. Say, your personal equipment that is damaged for personal use. Certainly, you cannot use up your commercial property insurance, since the damage does not fall under commercial use. What do you do? Home insurance is exactly for those situations. 

Renter’s Insurance

This is what you will need if you are renting your home. Much like Home Insurance, this will protect all your personal properties when the need arises. Any Renter’s Insurance will typically cover almost all your personal properties in the event of it needing repairs or replacement costs.

In Conclusion…

Is it wise to get business insurance coverage for your home business? Definitely! Better yet, hit two birds with one stone by insuring both your private and business properties, since we can never truly know when the time of trouble strikes.  It is better to be safe than sorry.

These insurances are entirely flexible and can be adjusted more according to the demands of your enterprise, and to suit it better.  So what are you waiting for?  Contact us today and get started on securing yourself and your business.