Homeowners insurance blog

20 Questions to Evaluate Your Home Business Insurance Needs

Starting a business, even a home business, is a daunting process filled with questions. For many new home business owners, insurance protection is not a top priority. It should be, however. One half of small business owners do not have adequate insurance coverage because they wrongly rely on their home insurance policies, according to the Insurance Information Institute (III).

Answer these 20 questions to determine what kind of insurance your business needs.

Take stock:

Business Inventory

    1. Do you have business insurance protection?
    2. What equipment do you use?
    3. What is the value of your equipment?
    4. What is your inventory worth?
    5. Do you have a record of everything your business requires?

Relying on your home insurance to protect your business interests leaves your profit vulnerable. Many home insurance carriers specifically exclude any business items. When carriers don’t exclude businesses, they enforce strict coverage limits on high value items such as computers or other machinery.

The best way to determine how much protection you need is to first take a detailed inventory of everything involved with your business: tools, equipment, and products. Log each item with its purchase price and its date of purchase. This will provide you with direction if something goes wrong. A standard policy typically limits coverage to $2,500 or less. Check your home insurance policy to make sure your business inventory doesn’t exceed your limits.

Choose your coverage:

Homeowners Policy Endorsement

    1. Does the value of your business inventory exceed your home insurance coverage limits?
    2. Is your inventory worth less than $10,000?
    3. How many business-related people visit your property?
    4. What is your home insurance policy’s liability limit?
    5. Will your business fail if damage to your house disrupts normal operations?

A logical first step in insuring a home business is a homeowners policy endorsement. If your business is just starting, this coverage probably makes the most sense. An endorsement to your homeowners policy can double your coverage limits for equipment in case of theft or damage.

If your business involves people visiting your property (delivery men or clients), you need liability protection. However, homeowners liability endorsements typically aren’t available for owners who have many visitors throughout the day – piano teachers, for example.

In-Home Business Policy

    1. Do you need protection for your important documents and records?
    2. Do you need to be compensated for loss of income if your house becomes uninhabitable?
    3. Do you need liability protection for your products or services?
    4. Do you have fewer than 3 full-time employees?

If you find your business in need of more comprehensive protection for property and liability, consider an in-home business policy. This type of policy includes coverage for lost documents and records. An in-home business policy also typically has business interruption or loss of income coverage, which can help compensate you for lost income if your house becomes damaged.  The liability coverage for this type of policy also occasionally extends to some products and services that your business provides. To qualify for one of these policies, you must have fewer than 3 full-time employees.

Business Owners Policy

    1. Do you have offsite business locations?
    2. Do you need extra liability and expense coverage, along with loss of income and property protection?

The most extensive insurance option is a business owners’ policy or BOP for small to mid-size businesses. A BOP includes expansive coverage for business property, equipment, loss of income, liability, and other expenses. If your business operates in multiple locations, your equipment, property, and liability coverage can extend to those other locations.

Optional Add-ons

    1. Do you need workers compensation, health, or disability insurance for your employees?
    2. Does your business use one or more vehicles?
    3. Do you need an umbrella liability policy?

Depending on your business type, you may wish to purchase additional policies or coverage types for your business. None of the above insurance coverage options include workers compensation, employee health, or disability insurance. In addition, if you use a vehicle for business purposes, make sure it’s properly protected with a business auto policy. If you feel the need for additional liability, consider an umbrella policy.

  1. Do you have a recovery plan?

Though 20 questions may seem juvenile, it’s best not to play games with the future of your business. Protect all your hard work by insuring it. Your recovery plan could include any of these types of insurance and a completed copy of your business inventory. If the unexpected strikes, your business can still come out a winner.