Is your Home Based Business Insured Correctly?

According to the National Bureau of Labor Statistics, 3 out of 10 homeowners operate a business out of their homes. More than 66% of the estimated 20.7 million people who work at home are self-employed and run a home-based business. It’s estimated that more than half of home-based business owners are under-insured and the Independent Insurance Agents of America (IIAA) say nearly 40% of those they surveyed are uninsured primarily because they thought their homeowner’s policy covered their business.

In order to avoid this worst case scenario, here are some general insurance terms and types of policies to consider:

General Liability Insurance

This form of a policy is designed to cover legal issues that may arise from an accident, injuries and claims of negligence. These policies protect against payments as the result of bodily injury, property damage, medical expenses, libel, slander, the cost of defending lawsuits, and settlement bonds or judgments.

** Every business, even if home-based, needs to have liability insurance.  The policy provides both defense and damages if you, your employees or your products or services cause or are alleged to have caused Bodily Injury or Property Damage to a third party.

Product Liability Insurance

Product liability insurance protects against financial loss as a result of a defective product that causes injury or bodily harm.   This is important for businesses that manufacture, wholesale, distribute, and retail a product may be liable for its safety.

Professional Liability Insurance

If you provide services (Accounting, legal etc.) should consider having professional liability insurance (also known as errors and omissions insurance). This coverage protects your business against malpractice, errors, and negligence in provision of services to your customers

** Your general liability policy does not provide this protection, so it is important to understand the difference.   Professional liability insurance is applicable for any professional firm including lawyers, accountants, consultants, notaries, real estate agents, insurance agents, hair salons and technology providers to name a few.

Commercial Property Insurance

Property insurance covers everything related to the loss and damage of company property due to a wide-variety of events such as fire, smoke, wind and hail storms, civil disobedience and vandalism. The definition of “property” is broad, and includes lost income, business interruption, buildings, computers, company papers and money.

Property insurance policies come in two basic forms: (1) all-risk policies covering a wide-range of incidents and perils except those noted in the policy; (2) peril-specific policies that cover losses from only those perils listed in the policy. Examples of peril-specific policies include fire, flood, crime and business interruption insurance. In general, most of our small business customers find that the all-risk policies fit their needs best.

** If you own your building or have business personal property, including office equipment, computers, inventory or tools you should consider purchasing a policy that will protect you if you have a fire, vandalism, theft, smoke damage etc.  You may also want to consider business interruption/loss of earning insurance as part of the policy to protect your earnings if the business is unable to operate.

In addition to the liability policies listed above – there is package policy – commonly referred to as a BOP

BOP (Business owner’s policy (BOP)

Since this is a package it is a great way to pull together all the coverage a small business could need. A typical BOP includes business interruption insurance, property insurance, vehicle coverage, liability insurance, and crime insurance. Typically, a business owner will save money by choosing a BOP because the bundle of services often costs less than the total cost of all the individual coverage’s.
Just a couple of more polices to consider and be aware of:

Commercial Auto Insurance:

Regardless of whether you have a company vehicle, or if your employees use their own cars for deliveries or other business related tasks, this is an important policy to consider. Commercial auto insurance protects not only the vehicles, but also the items or employees the vehicles are transporting.

If you do not have company vehicles, but employees drive their own cars on company business you should have non-owned auto liability to protect the company in case the employee does not have insurance or has inadequate coverage.  For these cases, it is often best to add what is called non-owned auto coverage to the BOP policy.

Worker’s Compensation:

This is required in Massachusetts! Worker’s compensation provides wage replacement and medical benefits to those who are injured while working. In exchange for these benefits, the employee gives up his rights to sue his employer for the incident. As a business owner, it is very important to have worker’s compensation insurance because it protects yourself and your company from legal complications. State laws will vary, but all require you to have workers compensation if you have W2 employees.  Penalties for non-compliance can be very stiff.

Thanks for reading and please share this information with your friends and family.

 Sanviti Insurance is a local Trusted Choice® agency that represents multiple insurance companies, so it offers you a variety of personal and business coverage choices and can customize an insurance plan to meet your personal or business needs. You can visit Sanviti Insurance online at www.SanvitiAgency.com or call it at 617-389-2020.

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