Finding the Right Home Business Insurance for Your Needs

So, you've just finished setting up your home office. Your laptop and phone are ready to go, and you made arrangements for your new business bank account. With these essentials in place, you're well on your way to successfully running your new business from home. However, you may have overlooked one important thing: home business insurance.

If you aren't sure about what home-based business insurance covers, or if it's right for you and your business, here's what you need to know.

Defining home business insurance

Insurance is an important ingredient in the financial framework of any home business. Just like larger businesses, small businesses—even those run from a kitchen table, family room or a desk in your basement—need insurance to protect them from financial risks.

Any business can face claims for losses, including claims from third parties, damages and injuries due to auto accidents, and property damages. Insurance for home-based businesses can also cover assets such as the technology and equipment you've invested in to help you run your operations.

You may be able to add additional coverage specific to your company's needs. For example, do you do business at locations outside of your home? Maybe you work on-site at a client's home or job site. If so, ask your insurance provider about coverage for activities conducted at these locations. It's possible to get a customized insurance policy to ensure your business has adequate financial protection.

How homeowners insurance fits in

First, review your homeowners insurance policy and touch base with your insurance company when starting your home business. If you're conducting business activities at home and your insurance company doesn't know about them, your personal liability insurance could be void.

Your homeowners insurance may cover some of the equipment used in your business—for example, your laptop. However, the coverage may be lower than required to replace the laptop and other special equipment you purchase for business use.

Note that your homeowners insurance premiums could potentially increase when you launch your home-based business. But when compared to the potential cost of covering financial damages, this increase should be relatively minimal.

Understanding additional policies

Depending on your business situation, you might find that you need additional insurance policies for your home-based business. Unless you have an insurance background, it may be difficult to calculate the amount of coverage needed and what types of events business insurance could cover.

That's why it's important to talk to an insurance professional. They'll gather details about your company and create a custom policy to cover your specific needs.

Knowing your options

Here are three of the most common types of home business insurance options:

1 General liability insurance

This type of business insurance protects your home business if you get sued. For example, negligence, damages from a faulty product sold by your business or personal injury could be covered by general liability insurance.

Do you store inventory or equipment in your home or at an off-site location? If not, this might be the only home business policy you need.

2 Business owner's policy

A home-based insurance policy gives business owners more coverage than homeowners insurance but isn't as complex—or typically as costly—as a commercial business insurance policy. It can be a good solution for growing home-based businesses.

A business owner's policy offers a combination of liability and property coverage. It covers loss and damages to the structure, inventory, equipment or income of your business resulting from damage to your home, for example, from fire or high winds.

3 Business owner's policy with endorsements

No two businesses are exactly alike. That's why it's important to have the ability to customize your home business insurance to include protection for your specific business and avoid paying for coverage you don't need.

A business owner's policy with endorsements allows you to do just that. Simply add endorsements customized to your particular business situation, such as protection against potential data breaches or covering your accounts receivable. If you operate a highly specialized home business in a niche market, this could be your best option.

Finding the fit for you

Whatever type of business you operate from your home, insurance is an important cornerstone of your finances. Review your needs based on your potential exposure to financial risks due to litigation or damages. Then, sit down with an insurance professional to select the right solution for your business.