When you buy insurance for your home, usually it’s a package called a homeowner’s policy, it will cover a wide range of possible losses. Things like fire, theft, vandalism, windstorms, hailstorms, lightning and a score of other catastrophes are covered for the home. In addition to that, personal property is also covered for the same losses as the actual home, and they are covered to a certain extent anywhere you go outside of the home as well. There is also an often-overlooked part of the policy that covers liability, like if someone slips and falls on your premises, your dog bites a neighbor, or if your child hits a baseball through someone’s window. These particular coverages are fairly uniform throughout the US in order for customers to be able to compare policies. There are some things that are not covered, however, if you happen to have a home-based business, and it can get complicated.
Having A Home-Based Business Increases The Risk
When it comes to insurance companies, there is probably no other type of business that is run by mathematical formulas and accountants than they are. They use statistics gathered over long periods of time to know how many storms, break-ins, floods, and earthquakes are going to happen in every city, county, and state in the US.
They know what items thieves target to steal, what neighborhoods thieves live in, and even what kinds of customers have more fires. Then, they use all of that data to come up with a rate that is competitive with the other insurance companies and that they can earn a profit from too.
The problem with a home-based business is that some of them have a much higher risk than a regular homeowner would so the insurance company excludes a lot of the business property and business risks from their homeowner’s policies to remain competitive in the market. But, if you aren’t aware of the exclusions, you might run the risk of having thousands of dollars of tools, equipment, and other property ruined or stolen that won’t be covered.
The other complication, is that there are a lot of things, like a computer, printer, phone system, projector, saws, drills, and you name it, that are both used for the business and also for personal use. The insurance company then has to try and divide the use by percentage in order to cover the various items fairly.
Many Insurance Companies Also Offer Home Based Business Riders
A rider is a small, attached, insurance policy that “rides” on a larger, more comprehensive policy, hence the name. You have to have the larger policy to be eligible for the rider. What the rider does, is extend your homeowners policy to cover business used equipment just the same as if it was all personally used. It usually doesn’t cost that much more, and it’s well worth adding it in nearly all cases.
Plus, the often overlooked part of your insurance, the liability, is far more important when you own some kind of business, since you’re more likely to be sued, if people think you have a business. And, depending on the type of business you have, you might have customers coming onto your property to buy, inspect items to purchase, or other reasons, so your risk is higher.
Here Are Some Of The Most Important Parts Of Business Liability
There are millions of home-based businesses, not just online affiliates sales, but real businesses that have customers coming to their homes. There are millions of craftspeople that make and sell all kinds of crafts, there are home beauticians, dog groomers, pumpkin growers, and woodworkers that all need protection.
If a customer comes to your home and slips on an icy porch, they might need back surgery that won’t be covered under your homeowner’s insurance because they’re a customer. Or, you might have a business repairing lawnmowers and accidentally hit a rock which goes through another neighbor’s window that you’d be liable for under property damage liability. These kinds of accidents result in law suits that can cost thousands for the attorneys, and more if you lose in court.
There can also be coverage for cash register money that you keep on the premises to make change and hold until you go to the bank. If your home is robbed, or the cash register catches fire, you could be compensated for the loss.
If You Care, Hold, Or Repair Items For Others
There are lots of home-based repair businesses, from lawnmowers and watches, to cars and appliances, and if they get stolen or your shop catches fire, The Property of Others Coverage would have you covered. There are numerous different ways that this kind of policy can help. If you’re a contractor and sometimes have the tools of your workers on your premises overnight, this would be very valuable to have.
There is also extra liability coverage from that not only extends the policy to cover business pursuits but also adds a considerable amount onto the upper limitation of the regular homeowner’s policy. While just for homeowners, an upper limit of $300,000 might be enough, for a business owner liability should be at least $1 million and possibly more, depending on the type of business.
Plus, if you’re making products at home that people are going to use, you’ll also need product liability as well. This would be useful if you’re making berry jam and people get sick and sue, or you make custom chairs and one of them breaks and injures a customer’s back, you never know what could happen and what you might be sued for.
When it comes time to get your home-based business insured, be careful to include every possible part of your business that you can think of. Consider contacting a Procom consultant. It may need to be listed on the policy or need an extra few dollars to extend the right coverage. It won’t be a lot of money and it could save you many thousands if something were ever to happen and someone gets injured or something gets stolen and you’re liable.