Consistently, surveys find that 50-60% of home-based businesses are uninsured. If you include people who rely on a home office as a second office, the statistics rise to nearly 70% of households with home offices missing proper coverage.
Most home office owners unintentionally lack proper protection because they believe their homeowners policy provides coverage for loss or damage to the home office.
First, let’s look at a homeowners policy:
- Usually, it will cover $2500 in-office equipment and $250 for equipment away from the office (think, laptop)
- Excludes business liability
- Excludes loss or damage of business records
- Excludes business interruption (loss of income).
How do you properly insure a home office?
- Permitted Incidental Occupancy - As the simplest and least expensive option (between $30-$100 depending on the company), it provides limited coverage. It removes the limitation for Business Personal Property and provides premises liability for the listed business. As a rule of thumb, this type of coverage works best for a home office with limited foot traffic, say 2-3 customers a week.
- Business In Home Endorsement - Some insurers now offer a hybrid of a business owners policy and a homeowners endorsement priced between $200-$400. This endorsement covers the loss or destruction of business property, loss of business income, liability insurance, and higher coverage limits.
- Business Owners Package - A business owners package (BOP) includes both property and liability coverage in a single policy for small businesses. If you have higher gross revenues, frequent business visitors to the home office (delivery people, couriers, customers), and have concerns about liability, a BOP may be your best option.
As your home-based business expands in future years, so will your insurance needs. The adequate coverage during your start-up phase could prove insufficient as the value of your business (and your equipment) increases. It is quite possible that you may even outgrow the coverage provided by your homeowners policy rider or the Business-in-Home Endorsement. Your business is constantly evolving, so you should review your policy at least once a year.