insurance

Working at home? Get home business insurance

Home insurance
Highlights
  • A rider on your home policy will protect you against some losses.
  • An in-home business policy won't cover you for errors and omissions.
  • A business owners policy offers a lot of coverage, but not workers' comp.

If you run a small business from your back bedroom, chances are your homeowners insurance policy won't cover a claim if the deliveryman slips and falls on your icy front stoop.

If your inventory catches fire in the garage, forget about it. Unless you have home business insurance that specifically covers your home-based business, you're on your own.

Maybe worst of all, if you give advice in your business and you make a mistake that costs a client money, the lawsuit that could result will mean money out of your pocket to settle it or defend against it -- unless you carry errors and omissions insurance that specifically covers your situation.

"If an individual is running a business out of their home, they can't rely on a homeowners policy to provide coverage," says Jeff Olmstead, assistant vice president for small commercial underwriting at The Hartford insurance company.

According to a survey conducted for the Independent Insurance Agents & Brokers of America, a trade association, 40 percent of people who work from home thought -- incorrectly -- that their homeowners or the insurance provided by their employers would provide coverage if they needed it.

"The typical homeowners insurance policy provides zero coverage for business-related claims," says Bill Wilson, associate vice president for education and research for the IIABA.

Wilson, who works from his own home office near Nashville, Tenn., says you can get one of these four types of home business insurance:

Endorsement on your homeowners insurance. Some insurers offer an inexpensive business endorsement. It can cost as little as $25 to $50 per year and cover, perhaps, $2,500 worth of computer equipment and a somewhat larger amount of the slip-and-fall variety of liability insurance. These policies rarely offer any professional liability. They can be appropriate for someone who works at home for another employer.

In-home business policy. These policies are a step up and will often reimburse you for the cost of recovering some lost computer data. For instance, if you should have a computer meltdown and lose your accounts receivable, this policy will usually pay a service to reconstruct your records. It is also likely to provide some business liability, but rarely specific errors and omissions coverage. Cost is between $250 and $500 per year, depending on the terms.

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Business owners policy. A business owners policy, known in the industry as a BOP, covers loss of data, general business liability/errors and omissions tailored to your business, and off-premises product liability in case your delivery is lost in transit. It will compensate you for loss of income for up to a year if fire or robbery prevents business as usual. If you have customers coming to your place of business, they'll be protected from accidents while on the premises. And if you and your employees use company vehicles, the drivers will be covered. A BOP doesn't include workers' compensation insurance, which covers employee accidents on the job. Many states require it. The price of a BOP policy varies based on the nature of the business and its location.

Commercial package policies are a step up. If you are running something like an automotive repair shop out of your garage, you'll definitely need one of these heavy-duty insurance policies, Wilson says. Commercial policies include workers' comp.

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