Insurance for a Home-Based Business

If you’re among the approximately 32 million home-based businesses in the United States, or if you’re an employee that is working from home, you should consider whether you have proper home-based business liability insurance coverage to protect yourself against losses associated with your business. 

Professional liability, commercial auto coverage, and workers’ compensation insurance are common types of policies that business owners need. Getting home-based business insurance quotes lets you know how much coverage you can afford.

Options for Home-Based Business Insurance

There are several ways to give your home-based business more insurance coverage. However, the type of business and the number of employees will impact your home-based business quotes.

Add a Rider

If you own a small business, adding a rider to your current home policy that extends your coverage is possible. This rider is used to address business equipment and limited inventory. 

In general, you’re a good candidate for a rider if you have less than $5,000 worth of business property. This inexpensive way to extend insurance coverage is a good option for remote workers. However, not every insurance company allows a rider on a homeowners policy.

Buy a Home-Based Business Insurance Policy

It’s also possible to buy an insurance policy written for home-based businesses. This commercial insurance policy addresses the liabilities of working out of your home and covers more than a rider would. 

You can choose up to $1,000,000 in general liability to cover operations that take place either at or away from your home. It also covers your personal property used for the business, whether on or off your premises.

To qualify for this coverage, your home has to be the primary place of business operations. You can sell goods or perform services away from home, but your residence must be the central operating location. 

You’re also limited in how many employees you can have under this policy. Most home-based business insurance policies limit you to three employees.

Use a Business Owners Policy (BOP)

When you need more coverage than available through a home-based policy, the next step is a business owners policy. It provides property, general liability, and business interruption coverage, and it’s more affordable to combine these coverages with a BOP. 

There are other distinct advantages to having a BOP over adding a rider or using a home-based insurance policy, including:

• Data breach liability protection
• Higher business property limits
• Protection from liability for injuries to third-party individuals on your property

However, BOP will have more expensive rates. It is in your best interest to compare multiple types of home-based business insurance quotes to find the most affordable price for your policy.

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How much does home-based business insurance cost?

Simply adding a business rider will often cost you less than $100 a year. However, a home-based business policy rates typically average between $250 and $400 a year, while a BOP averages between $600 and $1,200 annually. 

The base cost depends on how much protection you need, where you live, and the nature of your business. Taking out professional liability costs about $750 a year, though your insurance rates will be higher if you have a risky profession.

Additional policies will cost you extra. For example, commercial auto insurance rates average between $1,000 and $3,000 per year, while adding a commercial vehicle to a personal policy could add a few hundred dollars to your costs each year. 

Adding commercial umbrella coverage with a $1,000,000 limit can cost as low as $200 a year, with the cost increasing as you increase the liability limit. Purchasing workers’ compensation depends on the industry and size as well as the state where your business operates.

Other Policy Options for a Home-Based Business

Running a home-based business has many of the same risks as a commercial venture. For example, a lawsuit could cost you thousands, wiping out profits and your personal savings. You may consider additional policies to complement your home-based business coverage.

Errors and Omissions Insurance

Also known as professional liability insurance, this coverage is necessary for professional occupations, such as life coaches, lawyers, and massage therapists. When providing professional services or advice, there’s the potential for mistakes to happen. 

Though unintentional, the resulting damages from an unhappy client aren`t covered by a general liability policy. Errors and omissions provide the financial support for a legal defense if you`re sued because of a mistake you made. It can also cover a settlement up to a specified amount.

Commercial Auto Insurance

If your home-based business requires you to use your personal vehicle, you should think about commercial auto insurance. 

If you’re traveling to a client’s office or delivering your products, an accident isn`t covered through personal auto insurance. A commercial auto policy may also extend coverage if there are employees who drive your car. The liability amounts are higher and more inclusive.

Workers’ Compensation

Federal and state law requires certain employers to carry workers’ compensation coverage for their employees. This gives financial help to employees who experience injuries or illness while on the job.

Commercial Umbrella Policy

You can extend the coverage of both your auto insurance and general liability policies with a commercial umbrella policy. This policy provides financial protection beyond the liability limits of traditional commercial policies, starting at $1,000,000.

Limits of a Renters or Homeowners Policy

A homeowners policy has exclusions for common business liabilities. A homeowners or renters policy limits are also lower than what’s needed to cover your business equipment. 

There’s usually a $2,500 limit on business equipment while it remains in the home and a $250 limit for damage or theft that occurs off of your property. Given the cost of a laptop or printer, your standard coverage may not replace these items.

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What You Need to Know About Home-Based Business Insurance

You can contact your existing insurance company to find out about adding a rider to a homeowners or renters policy. You can also ask about home-based insurance options. 

You might need to look for commercial coverage with a company specializing in commercial insurance policies, especially if you’re looking for workers’ compensation coverage. Requesting home-based business insurance quotes will get you the best rates for your coverage.

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