Insurance Types for Home Businesses
If you’re running a company from home, you might already have insurance coverage in place that works for your business. If not, there’s a good chance that adding a homeowners policy endorsement could give you the coverage you need.
But the best type of insurance coverage for your business really comes down to the kind of company you own and the industry.
Here’s a snapshot of the primary types of insurance for home businesses, what they might cover and the kind of business they’re best suited for.
Homeowners Policy Endorsement
If your homeowners policy doesn’t have enough coverage, you can add basic business property and limited liability coverage with a Homeowner’s Policy Endorsement.
Many insurers offer endorsements specifically for people who run a business out of their homes to cover third-party bodily injury and property damage claims or to repair or replace business property, says a FitSmallBusiness insurance guide posted on its website.
A homeowners policy alone may already cover up to $1,500 worth of personal property, such as a desk or merchandise you have as samples, e.g., Mary Kay Cosmetics, explains a State Farm article. It might protect business property while it’s used or stored inside your home, and up to $750 worth of coverage for your business property while it’s away from your home.
If your home-based business is small, a homeowners policy without an endorsement might be enough coverage, the State Farm article says. “If not, you have the option to increase those coverage amounts with a homeowners policy endorsement.”
Some insurance companies allow you to increase your home business coverage up to $10,000, in increments of $2,500, notes the FitSmallBusiness guide.
Your home-based business, the guide says, is a good candidate for a homeowner’s policy endorsement if you don’t have significant liability risks or high-value business property to protect and have infrequent business-related visitors.
Commercial General Liability (CGL)
Commercial General Liability provides coverage to a business for bodily injury, personal injury, and property damage caused by the business’ operations, products or injury that occurs at your business.
Insurance experts suggest this type of coverage if you have customers or clients come to your home as part of your business, whether it’s for products or services.
State Farm says small businesses that provide services directly to customers in their home, such as hair salon services, may require additional specialized liability coverage.
“If you don’t have business-related visitors in your home and you don’t visit customers or vendors at off-site locations, you are less likely to need home business liability insurance,” adds the FitSmallBusiness explainer blog.
Commercial Property Insurance
Home-based business property that might need commercial property insurance coverage for risks includes computers, printers and inventory. A good example would be an ecommerce business such as an Amazon Fulfillment by Amazon (FBA) business.
Commercial property insurance covers damage to business-owned items due to certain covered events, such as fire, theft, vandalism, or hail. Examples include coverage for a building, equipment, office furniture and inventory. If the business’ property is damaged or destroyed, the property insurance helps cover the cost of repair or replacement.
“Home businesses with tangible assets that are needed for daily operations and are expensive to repair or replace need commercial property insurance,” writes Kimberlee Leonard in the FitSmallBusiness insurance guide. “It’s important to note that a standard homeowners policy does not always cover business property.”
Also, according to Leonard’s research, businesses where owners work at a client’s location but store their equipment at home (e.g., the garage), such as landscaping or a handyman services company, may need commercial property coverage.
“Home-based business owners who don’t have high-value business assets inside their home or who store their business property in an off-site storage unit may not need commercial property coverage,” she writes.
Errors & Omissions
This type of insurance covers injuries or financial damages due to your professional mistakes, negligence or bad advice.
It’s professional liability insurance that protects professionals and service-oriented business owners against liability claims arising from their mistakes or negligence.
E&O covers legal and defense costs as well as settlements if you are sued by a client for damages caused by your unintentional errors, including incorrect advice or accidental violation of a contract, the FitSmallBusiness writer explains.
Professionals who typically need E&O insurance include accountants, bookkeepers, lawyers, architects, computer programmers and real estate agents.
“Some home-based businesses may need a combination of a homeowners policy endorsement for business liability and property coverage plus E&O insurance to meet their insurance needs,” adds Leonard of FitSmallBusiness.
This is insurance that covers medical bills and partial lost wages for work-related illnesses and injuries.
Most states require businesses with employees (even remote ones) to have workers compensation insurance. However, workers’ comp is often not required for employees who are also owners.
Rules on requirements vary depending on where you live – some states require workers’ comp if you have just one part-time employee, while others require coverage with three or more.