Home-Based Business Insurance: Who Needs It?

If you own a home-based business or you’re thinking of starting one, you’re in good company. According to SBA statistics, Americans own about 28.8 million small businesses—and half of them are at-home businesses. The most common types of home-based businesses include information, construction, and professional service firms. But today’s entrepreneurs are getting creative, turning some serious profits by doing all kinds of things: selling items online (eBay, LuLaRoe, or Amazon), crafting custom works of art (Etsy), walking dogs, doing reiki, and much more.

Another commonality among today’s home-based businesses? Lack of proper insurance. According to Entrepreneur, as recently as 2011, sixty percent of home businesses were without adequate business insurance. Many assume their homeowner’s insurance policy will cover loss events (fires, floods, burglary). Others assume business insurance will be too expensive for them. But these business owners may be wrong on both accounts. Meanwhile, they are leaving themselves exposed to the following risks:

• Inventory and Equipment

Whether you’re a general contractor, a professional photographer, or a high-end fashion reseller, you probably have some valuable items stored in your home. An electrical fire or a burst pipe could spell big trouble for your business. You might also travel with these items to job sites, shows, or fairs, where theft and damage can happen. Home-based business insurance is designed to cover inventory and equipment whether it’s in your home office, garage, workshop, van or pickup truck.

• General Liability

General liability insurance typically protects businesses against any claims of property damage or bodily injury that results from your company’s operations, products, or accidents on your own premises. So if, for example, your home-based cupcake business made someone sick, general liability insurance would probably protect you. If you’re a dog walker who breaks a client’s antique mirror while trying to wrangle her two Great Danes, general liability would probably protect you. If you run a hair salon out of your basement, and a customer slipped on your stairs, general liability would probably protect you.

• Errors or Ommissions

In certain professions, giving the wrong advice or neglecting to complete a job in the proper way could lead to serious damage. For a contractor, this might mean using the wrong material. For an arborist this might cutting down the wrong tree. For a professional services provider (accountant, financial advisor, bookkeeper, etc.) this might mean failing to inform a client, failing to take the proper action, or failing to act consistently.

• Commercial Vehicle Insurance

Lots of small business owners use their family vehicle for business purposes. Just don’t assume your personal auto policy will cover a vehicle that’s being used to help you conduct business. In fact, your insurance company may actually cancel your policy if they find out (after the fact) that you are using your car to do business. Delivering products, driving to job sites, offering Uber or Lyft rides, plowing snow: these activities may all be considered commerical activities. If you don’t already have one, ask your insurance agent about a commercial auto policy and/or a business owner’s policy, which can include auto coverage among other things.

• Crime and Fraud

The statistics on cyber crime and data breaches are starting to get really scary. Criminals are targeting small businesses with less sophisticated security measures in place. To learn more, read our cyber attack insurance FAQs or watch our quick video on cyber liability insurance for small businesses.

• Workers’ Compensation Insurance

If you have one employee or more, you are required to have workers’ compensation insurance. Even if the employee is your spouse, your child, or other immediate family member—you still need workers’ comp in place. Without it, your business could be shut down. Get the scoop on MA workers’ comp insurance or call us for more personalized advice: 508.339.2951.

So, getting back to the question in the title: do you need insurance for your home-based business? Probably. The good news is, the right coverage may actually be very affordable. In some cases, depending on the nature of your business, you may only need to supplement your MA home insurance or renter’s insurance with extra protection for business equipment. Your best bet is to call an expert and review all the options. Reach our business insurance team at 508.339.2951 or info@candsins.com.