Insurance Considerations – Home Based Businesses

With the advancement of technology, there has been an unprecedented expansion in the number of home based businesses.  From app development to selling on eBay, consulting and more, you may not realize that you need a specific policy to protect your growing business.

The standard homeowners policy generally provides only $2500 worth of coverage, while companies have different endorsements to increase this amount, it still may not provide enough coverage.  The amount covered reduces drastically once the business property leaves the home, down to as little as $500.

While your homeowners policy may cover a small amount of business equipment, it will definitely not cover lost data, lost income or liability.

What if my office is located above my detached garage?  With the homeowners policy – there is an exclusion to coverage for “other structures” from which business is conducted.  In other words – if you use your detached garage as an office, the ENTIRE garage will not be covered under your policy.  And this is just related to business property, this doesn’t even take into consideration liability issues.

Do you have a home based business where you received packages via UPS or Fed Ex?  Do your clients or customers come to your home office for meetings?  Did you know that if the delivery person comes to your door with a business package in his hand and slips and hurts himself, there is no coverage for that injury in their homeowner’s policy.  Same holds true for any clients or customers who might come over for a meeting.

From the policy forms – Section II – Liability excludes coverage for bodily injury or property damage arising out of or in connection with a business conducted from the insured location or engaged in by an insured, whether or not the insured owns or operates the business or is employed by the business.

Oh, oh – does that mean that if you are working remotely, for someone else or a larger corporation, and a customer comes to your home, there is no liability coverage?  Yes.

In addition to having little to no coverage for your business, should you file a claim related to this “undisclosed” business your claim could be denied and your policy could be canceled for misrepresentation.

Signs You May Need Coverage

First, you should read your current homeowners insurance policy to determine what is covered and what isn’t. Consider the following questions:

  • Does your homeowners policy limit coverage of business equipment? Most homeowners policies restrict coverage in this area, and some even consider operating a home-based business a violation of the policy terms.  If you make as little as $2000 you could be considered as running a business.
  • Do you have an office but work from home regularly? In this situation, you may need additional coverage to help protect yourself from work-related incidents that occur in your home.
  • Do business contacts or employees visit your home, or do you do business in their homes? Many home-based business owners are surprised to learn that their homeowners policies often don’t cover third-party injury claims related to their work.
  • Do you keep business data at home? Whether printed out or on a computer, security breaches and technology failures leave companies vulnerable to lost income and client lawsuits. Insurers offer policy options that can help protect home-based businesses from these threats.

Don’t be alarmed, depending on your specific business and situation, there are several options available.  If you are more of a consultant – you could look into Home Business Insurance – this policy is a toned down version of a full BOP (Business Owners Policy) but it will provide you with coverage for all of your business personal property, general liability, medical expense and business income / interruption protection.

As always, it is best to speak with a local agent to discuss your specific needs.

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 us at 617-389-2020.

 

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