The National Board of Labor Statistics reports that about 30% of homeowners operate a business from their home. And more than two-thirds of these people who work at home operate a home-based business.
If you work from home, it’s important that you understand your homeowners insurance policy. Usually your homeowners policy offers very little coverage for your business—generally around only $2,500. And if your claim occurs as a result of a business function, you’ll get no coverage at all. Say, for instance, your dog bites the mail person. Ordinarily your homeowners insurance would cover dog bites. But if that mail person is delivering a work package, you’re likely out of luck!
Depending on the type of business you operate and the amount of revenue you generate each year, you have a few in-home business insurance options.
Home-Based Business Endorsements
An endorsement is sort of like an “add-on” to your homeowners insurance policy. It covers specific types of risks or claims. An endorsement can also increase your limits of coverage. An endorsement is only an option if your business generates no more than $5,000 in receipts per year, so it’s best for side businesses that aren’t your primary source of income.
A Separate Home-Based Business Insurance Policy
These policies are growing in popularity as more and more people work from home. An in-home business policy usually gives between $300,000 and $1 million in coverage and tends to be relatively affordable. If your home is damaged and your business is shut down, an in-home business policy will cover expenses like payroll or lost income. This type of policy also usually offers some coverage for the loss of valuable documents, off-site business property, use of equipment, and accounts receivable.
Business Owners Package Policy
Sometimes referred to as a BOP, a business owners package policy is a sort of off-the-shelf solution for small- and medium-sized home business owners. A BOP is an ideal option if you operate your business from more than one location or if you manufacture products outside the home. The coverage is much broader than that offered by an in-home business policy.
The business owners package policy is available to businesses in a wide variety of industries, but still can’t be used to cover every business. You’ll want to check with your insurance agent. These policies can cover businesses with up to $3 million in gross sales or 25,000 square feet.
If you operate a business out of your home, you’ll want to be sure that you have the right coverage. Your insurance agent can help you review both your homeowners policy and your business insurance options to find the best, most affordable fit for you.