If you have a home-based business, getting coverage looks a little different than it does if you run a commercial office space. Regular commercial insurance coverages might not kick in. Instead, you’ll need to check your homeowner’s insurance to verify that you’re covered in case of a loss to your inventory, computer, or other home office equipment.
Home-Based Businesses Are Becoming Increasingly Common
We’re currently in the middle of a massive shift away from traditional offices to a home-based office. There were roughly 15 million home-based businesses across the United States in 2021, according to Fundera by Nerd Wallet. That number looks to be staying steady for the foreseeable future.
While home-based businesses are common, the types of home-based businesses can vary. Some home-based businesses make their products in their home. Others store inventory. Still others meet with clients and serve clients inside their living quarters.
The differences between these types of businesses and their risk level is important to take note of, especially as you consider whether your homeowner’s insurance will cover you and the type of coverage you need. For example, a hairstylist who does hair in her home will have different needs than someone who handles paperwork inside their home office.
As you’re considering your needs, take the following into account.
Do you have inventory in your home office?
Keeping inventory inside your home office opens the door to unique risks. Fire, flood, or theft can halt your business and make it impossible to deliver to your customers in a timely manner.
On the other hand, if you are only using a computer to serve your clients, like construction contractors who typically spend most of their time outside of the home at job sites do, then you won’t have as high of a risk of financial loss in the event of a claim at your home office.
Understanding what types of equipment, inventory, and more would need to be replaced in case of a loss is important as your insurance carrier starts to underwrite your policy.
How spacious is your home office?
The square footage of your home office doesn’t determine your level of success, but it does determine how you will be insured. By taking into account how much of your home is dedicated to a workspace, your insurance company can estimate the risk level for your home-based business.
As you might have assumed, larger offices are often perceived as riskier since there is more space to cover, so their premiums tend to be higher. This is not a hard and fast rule, but it is something to consider as you shop for a proper policy.
Do you have employees who work for you inside your home?
Whenever you welcome someone into your home who isn’t a guest, but rather, is there to work for you, a new level of coverage enters the mix. Your typical homeowner’s liability limits might not be enough to cover injuries that could occur in the event of a fire or slip and fall accident in your home. Liability coverage for employees isn’t a standard part of homeowner’s insurance policies, but coverage can extend in some cases.
Likewise, homeowner’s insurance companies know that the more you have employees going in and out of your home on a regular basis, the higher the likelihood that there could be an injury. You will need to have the right coverage to protect your employees and avoid paying out of pocket for those losses.
Are you incorporated?
The type of business entity you run out of your home matters to your homeowner’s insurance company. In some cases, the rules change based on whether you have an LLC or S Corp, versus if you’re not incorporated.
Will you have customers on-site at your home?
Similar to having employees working on-site at the home office, some home-based businesses also welcome customers into their homes. For example, piano teachers might allow students to come to their house for lessons and use their instruments. In these circumstances, it’s necessary to have additional insurance to cover the potential liabilities that could occur as a result.
Just as was the case when you have employees on-site at your home, when welcoming customers into your home, your homeowner’s insurance typically won’t cover you. This type of coverage isn’t standard on most homeowner’s insurance policies, but in some unique circumstances, coverage can extend to your customers.
Getting Your Home-Based Business Covered by Homeowner’s Insurance
Each home-based business is slightly different. The best thing you can do is talk to someone who knows about your business and has access to a variety of markets to help you find the best coverage for your unique needs. At McGrath Insurance Group, we are able to research the type of coverage you’ll need in both personal insurance lines and commercial insurance lines. That way, no matter what your business is and the coverage you need, we can help give you the options to choose what best fits your situation.
Contact us to request a proposal and get the process started. We will work with you to give you peace of mind knowing that your family, team, and inventory all remain safe in the event of a loss.
