Running a business from your home can offer a lot of benefits. At its best, a home based business can enable you to work a flexible schedule, balance work and family life, and limit overhead costs. And the commute can’t be beat.
But a home-based business faces risks just like any other business—and it’s important that you put the right insurance coverage in place to protect yourself. While your homeowners or renters insurance may provide coverage for some of your business property, it may not be sufficient to cover the broader range of risks faced by most home businesses.
The risks of running a home-based business
Different types of businesses face different risks. To find the right insurance, consider what your business does so you can identify what coverages you need. The most common risks to home based businesses include:
Property damage or loss — Your business can face a huge setback if equipment, inventory, or your workspace is damaged by fire or water.
Personal injury lawsuits —If a customer or contractor visits your home office or workshop and sustains an injury, your business may be liable. Similarly, consider if your business provides products that could result in injury or illness.
Professional liability — If you provide professional services and an error or omission could result in your clients sustaining financial loss, your business could be held liable. Accountants, marketing and advertising professionals, and consultants, for example, have potential professional liability exposure from the services they provide.
Cybersecurity —Data breaches and ransomware are growing threats to small businesses. Your business can be disrupted by cyberattacks and held liable for the loss of sensitive customer information.
Vehicle liability — If you use a vehicle — even your own personal car — for business purposes, you’ll likely need additional coverage beyond your personal auto policy.
In addition, if your business has employees, your business must comply with applicable laws requiring you to purchase workers compensation insurance coverage.
Three key insurance options
For many home-based businesses, you may be able to find sufficient coverage from the following options:
Endorsement to your homeowners or renters policy —If you have few or no customers or work partners visiting your home based business, you may be able to add a simple endorsement, also known as a rider, to your homeowners or renters policy. This type of coverage is usually only suitable if your business has low revenues—e.g., less than $5,000 annually—and has little equipment or inventory to cover.
In-home business policy — Some insurers offer in-home business policies, which provide greater coverage than an endorsement to a homeowners policy. This type of policy will cover destroyed or damaged business property and general liability, which is designed to provide coverage if someone is injured while visiting your home business. An in-home business policy may also provide business interruption coverage, which can cover temporary relocation costs following damage to your property from fire or a storm.
Business owner’s policy (BOP) —A business owner’s policy — or BOP — provides more robust coverage than an endorsement or in-home business policy. It is suitable if you work from home as well as lease office space. In addition, this type of policy gives your business room to grow, with coverage available for businesses with higher revenues than what’s allowed by an in-home policy. A basic BOP provides commercial general liability coverage and commercial property coverage. Depending on the insurer you work with, a BOP may also include business interruption coverage, which will help cover operating costs when your business is disrupted by a covered event, such as a fire that damages your home office.
Other business insurance to consider
Depending on what type of business you operate, you may need to obtain additional coverages. You may be able to add optional coverages to your BOP, but in some cases, you may have to purchase separate policies. Other coverages to consider include:
Business automobile coverage — If you regularly make deliveries or drive to client meetings, you’ll need this insurance to cover damages from an accident.
Cyber insurance — Data breaches, hacks, and ransomware have increased in recent years, with small businesses heavily targeted by bad actors. This type of coverage can help you recover from a cyber incident.
Professional liability — This type of insurance helps cover losses if your professional services cause a financial loss for a client or an error or omission results in a faulty or unusable work product. For instance, if you’re a graphic designer who is responsible for a costly print run of a brochure with an error, this coverage could help pay reprinting costs.
Workers compensation — Nearly every state requires businesses with employees to obtain workers compensation insurance, which pays for medical treatment, rehabilitation, and lost wages for employees who are injured on the job.
Take preventive action to protect your home-based business
The right business insurance can provide peace of mind and help your business recover from adverse events. You may also need insurance to meet contractual or legal requirements. For example, government agencies often require contractors to carry certain coverages.
At the same time, your business will benefit if you take actions and establish practices that prevent claims in the first place. Consider taking these steps to reduce risks and improve your operations:
Maintain a safe and healthy workspace — You and your employees can work more effectively and safely in a workspace with good lighting, ergonomically suitable furniture and equipment, and good ventilation.
Prevent slip, trip, and fall accidents —Falls are the most common office accident. Keep power cords out of walkways and make sure your flooring is flat and secure.
Follow cybersecurity best practices —Keep your technology — both hardware and software — up to date and patched. Maintain data backups — and consider using a cloud backup service. Be cautious about clicking on links or opening files from unknown senders.
Put it in writing —Depending on your type of business, you may want to enter into written contracts or agreements with customers to minimize misunderstandings and even legal disputes.
This document is advisory in nature and is offered as a resource to be used together with your professional insurance advisors in maintaining a loss prevention program. It is an overview only, and is not intended as a substitute for consultation with your insurance broker, or for legal, engineering or other professional advice.
Chubb is the marketing name used to refer to subsidiaries of Chubb Limited providing insurance and related services. For a list of these subsidiaries, please visit our website at
www.chubb.com. Insurance provided by ACE American Insurance Company and its U.S. based Chubb underwriting company affiliates. All products may not be available in all states. This communication contains product summaries only. Coverage is subject to the language of the policies as actually issued. Surplus lines insurance sold only through licensed surplus lines producers. Chubb, 202 Hall's Mill Road, Whitehouse Station, NJ 08889-1600.
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