Home-Based Business Insurance

Some of the top factors that affect home-based business insurance costs during the underwriting process include:

• Services offered: Your premiums depend on the risks associated with the services you offer, such as consulting, caregiving, or event planning.
• Industry risk. Insurers look at the claims history of businesses in your industry. For instance, home bakeries and other cottage food operations may face claims related to allergens or food poisoning.
• Value and type of equipment: The value of your computers, inventory, tools, and other business equipment affects your insurance costs.
• Safety measures: Insurance companies sometimes offer lower rates to businesses that have cybersecurity controls and a strong focus on accident prevention.
• Annual revenue: Home businesses that earn more revenue are associated with costlier claims, which means they pay more for insurance.
• Number of employees: A bigger workforce means an increased risk of accidents and injuries, which raises the cost of general liability, workers' comp, and similar policies.
• Coverage options: You can save money on insurance by opting for lower limits or higher deductibles on your policies, but make sure it's sufficient to cover a potential claim.
• Claims history: A business that has filed an insurance claim in the past will cost more to insure than one with a clean claims history.
• Business location: Localized factors, such as crime rates, healthcare costs, litigation fees, and property values, can impact your insurance premiums.

The best insurance for home-based businesses helps you withstand unexpected costs from fires and other incidents, while opening the door to new clients and ensuring compliance with laws and regulations.

Here's why insurance is crucial for LLCs, sole proprietors, independent contractors, and other business owners who work from home:

• Insurance helps you sign contracts. Clients may require you to carry insurance to protect themselves against potential losses. In some cases, they may ask you to list them as an additional insured on your policy.
• It's required by law. Depending on the laws in your state, you may need coverage for a business-owned vehicle, to get a license in your field, or to hire employees.
• You gain client trust by being insured. Business insurance displays professionalism and reliability. It helps attract clients and can give small business owners an edge over their competitors.
• You might need it for a loan. Commercial insurance is often required in order to get a business loan, as lenders want to know their investment is protected.

Even when insurance isn't required, it provides essential protection against catastrophic losses. Small businesses pay an average of $54,000 for liability suits, and often lack the resources that larger companies draw upon to survive a legal battle.

There are several important differences between homeowner's insurance and business insurance. As a home-based business owner, you likely need both.

Homeowner's insurance covers your house and your personal belongings, and it also pays for legal costs and medical expenses if someone is injured at your home. In some instances, a homeowner's policy will include minimal protection for business property, or you can add a home business endorsement to expand your coverage.

However, homeowner's insurance (and renter's insurance) won't cover business-related liabilities, such as a client who trips in your home office, or a delivery person who slips on an icy step while dropping off business supplies.

Business insurance protects your business property and covers business liabilities. You'll need both liability insurance and property insurance for complete protection:

• For business liability protection, small business owners typically invest in general liability insurance. It covers slip-and-fall injuries, accidental property damage, and other personal injuries and advertising injuries.
• To protect business property, you can buy commercial property insurance to cover a commercial space and its contents. Or, you can add business personal property (BPP) coverage to a general liability policy to cover inventory, computers, and other business property stored at your home or other designated location.

The best home-based business insurance in terms of coverage and cost is a business owner's policy, which bundles general liability and commercial property insurance at an affordable rate. Chat with an insurance agent to make sure your coverage matches your business needs.

Every business should carry general liability insurance, as it covers the most common types of lawsuits. Whether you need a business owner's policy depends on the type of property you need to protect.

• If your business owns or rents a commercial space, then it makes sense to buy a business owner's policy. A BOP includes commercial property insurance that protects your office and its contents against fires, theft, storms, and similar incidents.
• If you don't have an office or other physical space, then you can add business personal property coverage to your general liability policy instead. BPP coverage protects your computers, equipment, inventory, office supplies, tools, and other business property in the event of loss or damage.

Business owner's policies often include business interruption coverage, which is a major benefit. Also known as business income coverage, this policy covers daily operating expenses and lost income if your business is forced to close temporarily due to a fire or extreme weather.

The policies your business needs depend on your specific risks, such as whether you drive for work or have a client who requires a certain type of insurance.

Other popular options for home-based businesses are:

• Product liability insurance helps pay for legal fees and other costs related to harm caused by a product. It's usually included in general liability insurance.
• Equipment breakdown insurance covers losses related to the unexpected failure of a point-of-sale (POS) device or other equipment.
• Commercial umbrella insurance covers legal expenses when the limit is reached on another liability policy, such as general liability or commercial auto insurance. Home-based businesses may need an umbrella policy to meet client requirements for higher coverage limits.
• Crime insurance, such as a fidelity bond, provides reimbursement in the event of employee theft or fraud. It's sometimes called employee dishonesty coverage.

Our expert agents can help you find any specialty insurance policies you may need and answer your questions about coverage.