Home-Based Business


Insurance Needs Change When Home is Your Workplace


For the millions of U.S. small business owners who operate exclusively from home, not understanding the differences between personal and commercial insurance liabilities can be costly. Owners who assume their personal insurance policies for home, auto, life and health will automatically protect their business interests may be in for a few surprises.


Homeowners' or renters' insurance policies are rarely adequate to cover the unique needs of a home-based business. Most individual policies limit coverage for business property losses or damages to $2,500 in the home and $250 away from home. These policies tend to exclude business-related liability claims from persons injured on your property, and provide no protection to sustain the business during downtime associated with a property loss. To close these gaps, owners may want to investigate the purchase of a business owners policy or general liability, business property and business interruption/continuation insurance.


While all auto insurance policies are similarly structured, there are important distinctions between personal and commercial vehicle coverage. Typically, commercial vehicle insurance carries higher liability limits, and includes special provisions for rented and other non-owned vehicles, including employees' cars driven for company business. If you own or lease a vehicle almost exclusively for business use, make sure the business name is listed as the principal insured. You also may consider increasing coverage to protect permanently attached items such as a generator or storage unit.


Since home-based businesses often cease to exist once the proprietor dies, life insurance is most often viewed as a personal, non-business concern. This approach may present significant risks if your home-based business is a partnership. One way to help secure the organization's future is Key Person life insurance. This type of policy names each partner in the business as beneficiary on the other's policy. If a partner dies, the other can use the life insurance payout to buy out the deceased partner's heirs, pay off outstanding loans or other obligations, or continue operations until a replacement employee is hired and trained.


For small, home-based businesses, finding affordable health insurance for you and your employees used to be a challenge. But without health insurance, it is conceivable that one catastrophic event could dissolve the business. Today, small and home-based businesses have a variety of sources for purchasing HMOs, PPOs, EPOs and other popular health insurance plans at group rates. And under the Affordable Care Act (ACA), business owners and the self-employed who purchase coverage through new healthcare marketplaces may qualify for premium tax credits and subsidies. Failure to purchase appropriate health insurance could result in a tax penalty.


Workers' Compensation Insurance: Not Just for Big Business
New business owners may be surprised to learn that most states require you to purchase workers' compensation insurance even if you have only one employee. These plans protect the business from claims by employees who experience a work-related injury or illness either on business premises or during business operations. Payouts typically cover medical expenses, rehabilitation costs and lost wages. If you don't have workers' compensation when an incident occurs, your business may be liable and you will lose the limitations on an employee's ability to sue you specified in the workers compensation law.


Home-Based Business Insurance Tips and Considerations