Running a business from home comes with many perks. You get to be your own boss, ditch the commute, and work in your pajamas if you want to. But while home-based businesses are booming, there's one important thing that many entrepreneurs overlook: their insurance coverage.
A common misunderstanding is that homeowners' insurance fully covers business-related risks. Unfortunately, this isn’t true. If anything goes wrong with your business property, clients, or operations, relying solely on your homeowners policy can leave you with costly gaps in coverage. That’s where specialized business insurance comes in.
This guide will walk you through why homeowners insurance isn’t enough, the risks you face, and how to protect your home-based business with the right coverage.
Homeowners' insurance is designed to protect your personal assets—not your business operations. While it does cover a wide range of incidents, its limits and exclusions often don’t extend to your home-based business.
Most standard homeowners' policies include a small amount of coverage for business equipment, such as computers or printers, but the limit is often capped at around $2,500. If your business relies on expensive tools, machinery, or inventory, this amount won’t even begin to scratch the surface if they’re damaged or stolen.
If a client or delivery person is injured on your property while conducting business, your homeowners insurance policy likely won’t cover you. Business-related liability is typically excluded, which means you’d have to pay for any medical or legal costs out of pocket.
Homeowners' insurance also excludes coverage for events tied to your business. For example, if a power surge destroys your business files or your inventory is damaged in a fire, a standard homeowners policy won’t help.
Running a business comes with its own set of risks, and those risks don’t disappear just because you’re operating out of your spare room. Here are some key vulnerabilities to consider:
Getting the right coverage depends on the nature of your business. Here are some options to keep in mind:
Think of this as an add-on to your current homeowners' policy. It provides limited coverage for business equipment and some liability protection, making it ideal for very small operations with minimal risks.
This standalone policy is a step up from an endorsement. It includes more comprehensive coverage for both property and liability, perfect for moderately-sized home businesses.
A BOP combines general liability, property coverage, and business interruption insurance into one package. This versatile option works well for most small businesses, whether you offer services or sell products.
If your business manages or stores sensitive data, cyber liability insurance protects you against data breaches, hacks, and other digital threats.
Also called errors and omissions insurance, this is crucial for service-based businesses providing advice or expertise. It protects you if a client claims your advice caused financial harm.
To understand why these policies matter, consider these scenarios:
Every home-based business is unique, so here’s how to tailor your coverage:
Consider the nature of your business. Do you stock inventory, handle customer data, or frequently meet with clients at home?
Create a detailed inventory of your business equipment, furniture, and supplies to estimate their worth.
Think about how often people visit your home for business purposes, and whether accidents could occur.
Work with an insurance agent who can help you identify risks and customize a policy to cover them effectively.
Home-based businesses are thriving, and there’s no reason you can’t enjoy the comforts of working from home without worrying about risks. However, expecting homeowners' insurance to cover your business needs can leave you vulnerable to financial losses.
Contact an insurance expert today to review your current coverage and explore business insurance options. Protect your business and thrive confidently, no matter where you work.