Why Home-based Businesses Need Special Insurance Protection

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Do you run a business out of your home?

If you do, youre not alone: According to the National Bureau of Labor Statistics, three out of 10 homeowners operate businesses out of their homes. And, like many owners of home-based businesses, you may think that your homeowners (or renters) insurance policy covers your business.

Think again.

A typical homeowners policy may cover damages up to $2,500 on the premises of a home-based business, and $250 off the premises. But there are a host of potential liabilities and hazards that your homeowners policy wont cover. Here are just a few:
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- A UPS driver slips and falls on your property while delivering a business-related package.

- You face a lawsuit for damages related to your business products and/or services.

- A fire or other disaster leaves you unable to operate your business for an extended period of time.

And what about auto insurance? Personal auto policies do not cover autos used for business purposes. Period. And, if you file a claim against your homeowners, renters or auto policy for losses related to a previously undisclosed home business, not only can your insurance company refuse to cover it they can cancel your policy.

What coverage do I need?

First, analyze the type of home business you operate and all the components of that business. Heres a list of basic questions that will help your agent match you with the right policy:

- Do you supply, manufacture or create a product?

- Do you operate a vehicle for any business-related purposes?

- Do you use electronic equipment (e.g., computers) for your business and do you use that equipment for personal, non-business purposes?

- Do you provide a professional service?

- Do people come to your home for any business-related purposes?

Basic coverage types for your business

There are three basic types of coverage available for home-based businesses:

1. Riders or endorsements The most inexpensive home-based business insurance is an add-on or rider that expands a homeowners or renters policy to cover the company. These typically provide about $2,500 of additional coverage. This coverage may work for a small one-person business without much valuable equipment or many business-related visitors and those unlikely to suffer a major loss if unable to operate in the event of a disaster.

2. In-home business policies These policies cover up to $10,000 in losses and provide general liability coverage up to $1 million (e.g., that UPS driver). And, in the event of a disaster, an in-home policy will cover lost income and expenses (such as payroll) for up to one year, as well as some coverage for loss of valuable documents, accounts receivable, off-site business property and use of equipment.

3. Business owners package (BOP) policies If you need more than $10,000 of coverage, a BOP is the right choice, particularly if your home-based businesses operates in more than one location or manufactures products outside your home. Like an in-home policy, a BOP covers property and equipment, loss of income, expenses and liability but on a much broader scale.

Talk to Your Insurance Agent

As you can see, choosing the right insurance for your home-based business is an important step to safeguard your livelihood. Your insurance agent will help you analyze your business and match you with a policy that fits your needs and your budget. Give him or her a call today.

by: Pamela McCann

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