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The Small Business Administration (SBA) estimates that nearly half of U.S. businesses are based out of the owner’s home. With the contract economy and remote working opportunities become more of a social norm, this number is likely to grow. It does leave open the question: what does a homeowners insurance policy cover in the case of a loss?
Many home-based business owners mistakenly believe that their homeowners insurance policies will cover them if there is a loss. The truth is that many homeowners insurance policies have limits on the types of losses that would affect a home-based business. Other types of business-related claims might not be covered at all, while some homeowners policies list operating a home-based business as a violation of terms. As a result, the first and most important step you can take is to understand exactly what your existing homeowners policy covers. Armed with that information, you can then take steps to determine what additional coverage you may need.
Are you a remote employee of a company?
If you work from home as a remote employee, you are most likely covered by your employer’s insurance for work-related issues. Some factors to consider that may mitigate that are if you are not a full-time employee or if you work for a BYOD (bring your own device(s)) company. Most companies that have remote employees as a normal course of business will have policies in place for things like business equipment damage, workers’ compensation if you are injured in your home while doing company work, and even auto coverage if remote employees are expected to use their own vehicles to do company work. Check with your employer if you have questions.
Do you have clients or customers visit your home?
If a client or customer were injured in your home or on your property while visiting you on a work-related matter, your homeowners liability insurance might not cover you completely — or possibly not cover you at all for the accident. You would need a business policy to cover this situation.
Do you have equipment that you rely on for work while working from home?
If you use your home equipment for business purposes, there is a possibility that you may not be covered if you have a claim. For example, if your cookie-baking hobby turns into a business and your oven is damaged in a fire, is it a business equipment loss, or a homeowners policy issue? This is an example of a situation that you should discuss with your agent before you establish your business. While some homeowners policies cover some business equipment, such as laptops, there are generally restrictions limited by value or by use. You may need separate business insurance.
Do you have access to sensitive data through your home-based work?
Cybersecurity breaches, the loss of private client data, or even the loss of the use of your equipment due to a computer virus, can all affect your business and leave you open to liability lawsuits. If you work from home for an employer, you might be covered by your employer’s policy — but it’s a good idea to find out if there are any exclusions. If you own your own business and work out of your home, your small business policy will likely cover these types of situations, so make sure your carrier knows exactly what type of home business you have so you are covered adequately.
Do you make strategic recommendations to clients?
If you are providing guidance on business strategies, your agent will most likely encourage you to purchase business liability insurance in case one of your recommendations results in a loss of reputation or money for your client.
Do your clients require you to have business insurance?
Some clients will require proof of business insurance, and some might ask to be listed as an additional insured on your policy.
There are different insurance options available for home-based business owners. Your best bet is to talk to your carrier or agent, explain your business, and see what is right for you.
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