From the Nolo eCommerce Center
Be sure to treat your home business like a business – including obtaining appropriate insurance for it.

If you operate a business from your home, it’s important that you obtain adequate insurance for it, just as if you had a separate office. Even a small home business deserves full protection against calamity. Most important, never rely exclusively on your normal homeowner’s policy. If you do, bad things can happen:

  • After your computer is stolen, you may find out that it’s not covered by your homeowner’s policy because business property is excluded.
  • After your house burns down, you may find that the fire coverage is void because you didn’t disclose your business use to the insurance company.
  • After the UPS delivery person slips on your front porch and breaks his back, you may find you’re not covered for injuries associated with business deliveries.

It’s easy to avoid these nasty surprises. Sit down with your insurance agent and fully disclose your planned business operations. It’s relatively inexpensive to add riders to your homeowner’s policy to cover normal business risks. You may need separate policies for other business-related coverage.

When it comes to business equipment and furnishings, figure out how much it would cost for replacements after a fire, theft or other disaster. Don’t overlook things such as the specialized business software you run on your computer. Depending on the nature of your business, replacing equipment and furniture could run into many thousands of dollars. Ask your insurance agent what it takes to insure this valuable property, allowing for a good-sized deductible to keep costs down. Make sure that the coverage on equipment and furnishings is for the full replacement cost – not just the depreciated value, as can be the case in some homeowner’s policies.

Your homeowner’s policy may also not adequately protect you from liability to business visitors. Accidents – such as people getting hurt when they trip and fall – are more likely to happen at home than in a well-planned office building. Your homeowner’s policy probably protects you if you’re sued by a social guest or someone at your home for a non-business purpose – a florist’s truck driver delivering flowers or the meter reader who’s checking on gas usage. But it may not cover a business associate, employee, customer or delivery person who is injured on your property.

Some home-based businesses need special kinds of insurance. If you render professional services, look into professional liability insurance. If you manufacture, distribute or sell products that may hurt someone, think about products liability insurance. Also, if you have employees, you’ll need to provide workers’ compensation coverage.

If you do some business away from your home, be sure that your car insurance covers injuries that occur while you’re on business errands. And see about the extent of your general liability coverage if you should accidentally injure someone or damage their property while away from home on business. You may need a rider or special policy to cover this risk. The Insurance Information Institute reports that many insurance companies are offering such riders for less than $200.

Policies to cover both your home and home business.¬†Several insurance companies have developed special policies that cover both your home and a business run from your home. Typically, these policies cover your computer equipment and other business property – whether used in your house or elsewhere – and protect you from business liability lawsuits and loss of income. These policies can be less expensive than either adding riders to your home insurance or buying separate policies for home and business. But check the coverage carefully, as these policies tend to primarily address home offices and may not adequately insure you if, for example, you’re a small manufacturer or a wholesaler who stores inventory in the basement.

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