I was considering beginning to work from home. When I began to plan for my new career and what was necessary to begin, the first question I asked myself was whether I need work from home insurance.
Well, do I need work from home insurance? When operating a home-based business, you could potentially be liable for very large, unsuspected expenses. Whether you are meeting clients at home or there is a potential problem with the service you provide, there are always possible risks. There are several different types of insurance to protect yourself.
Many people believe a homeowner’s insurance policy, or even an “umbrella” policy will protect against costs which are due to an accident in your home office, but that frequently is not the case. A simple slip and fall can lead to devastating losses.
Types of Work from Home Insurance
If you do not have home-based business insurance, not only will your homeowner’s insurance not cover you for losses due to your business, but it may even invalidate your homeowner’s insurance. With all of these facts in mind, work at home insurance becomes a critical need. The exact type of work from home insurance you require depends on your type of business.
Commercial Liability Insurance
All business owners should have some form of commercial liability insurance. No matter what type of business you are in, this is the most important basic insurance to have. There are many, potentially expensive, problems that can be caused to you or others due to the operation of any type of home-based business, and each must be protected against. Not only can these difficulties affect clients, but they can have a serious financial effect directly on you. Many potential problems may seem like they would be covered by your homeowner’s insurance but are not. Some of these uncovered requirements include:
- Bodily Injury: This is often infamously known as “slip and fall” insurance, as this is the most frequent type of claim. Although homeowner’s insurance policies may cover you against injury to your guests, your business is separate from your home. Even though your office may be at home, this does not help you if there is an injury caused by your business. Any sort of injury a client suffers in your office or your home can become a very serious financial problem if you do not have Commercial Liability Insurance.
- Property Damage: If you or one of your employees accidentally damage someone else’s property in the course of doing business, you may find yourself responsible for the costs. This can range from a maid you employ who damages someone’s furniture, to a contractor who is providing maintenance, or your delivery person damaging something while dropping off merchandise. Commercial Liability Insurance protects you from the financial consequences of that mistake.
- Personal Injury in Advertising: If your advertising campaigns lead to libel or slander suits by your competitors, the best form of protection against this can be found as part of a proper commercial liability policy. You may have unknowingly violated a copyright with your advertising. Even something you may not consider to be a problem may become one, especially in our litigation-happy society and the strict rules of political correctness. What may seem harmless to most people might give serious offense to someone else, and they may have expensive lawyers working for them.
Commercial Property Policy
This insurance covers your home businesses equipment, from something as minor as a computer or printer to much more expensive items. Pricier equipment might include very expensive tools like custom photography equipment or other specialized equipment. You are covered against damage to or theft of this valuable property.
Errors and Omissions Insurance
If your business involves giving advice that may be incorrect, errors and omissions insurance would be necessary. Just as doctors and lawyers need malpractice insurance, anyone who provides mistaken advice could be at risk for a lawsuit. The home-based financial planning service that seemed like such a good idea could bankrupt you if you are sued due to what may be called negligent advice that leads to the customer being harmed. This is also sometimes called professional liability insurance. That may sound like a more “official” name, but both are the same thing.
In addition to harmful advice, this type of insurance provides protection if you provide an inferior product, such as improperly designing a deck or installing tiles.
Workers Compensation Insurance
While most forms of insurance for home-based businesses are very good ideas, workers compensation insurance is often legally required. Laws differ from state to state regarding which businesses must carry workers compensation insurance, but it is a very good idea to carry this insurance even if you do not fall under the legally required group of businesses which must carry it.
Under workers compensation laws, you are liable for injuries suffered by your employees in the consequence of their work, no matter what the cause. This can include everything from medical bills, lost wages or permanent disability. Workers compensation insurance protects you from paying for these potentially catastrophic events.
How Much Does Work from Home Insurance Cost?
The cost of different types of home business insurance varies greatly depending on your type of business, where you live, what that insurance covers and how much the insurance company may be liable for.
- Commercial Liability Insurance
The most important basic insurance all businesses need usually costs between $250 and $350 annually.
- Commercial Property Policy
This policy that covers your equipment typically costs between $200 and $300 annually. Commercial property insurance policies are frequently bundled together commercial liability policies. The combination is usually called “Business Owner’s Policy” or “BOP” and usually costs between $350 and $500 per year.
- Errors and Omissions Insurance
Your location and line of work can vary much the cost of errors and omissions insurance more greatly than any other type of coverage. A small consulting company or a photographer may cost between $500 and $1,000 annually, but good luck if you are an engineer living in Florida.
- Workers Compensation Insurance
This insurance also varies greatly depending on your type of business. If you employ clerical workers or similar office support staff, workers compensation insurance may only cost between $300 and $1,000 annually. However, if you employ roofers or other people engaged in potentially dangerous jobs, this will be much more expensive.
- Business Interruption Insurance
In addition to protecting yourself against liability, you may also want to purchase business interruption insurance. This will reimburse you against lost revenue in the event you are forced to suspend operations completely due to fire, flood or some other type of disaster. In addition to protecting your businesses, if you have a small business dealing with large corporations, they may require proof of insurance.
- Incidental Home Business Endorsement
In some situations, lack of business insurance will not violate your homeowner’s insurance policy. In this case, you may be able to purchase a small policy extension that can be attached to your homeowner’s insurance policy. If you do not have a commercial liability insurance policy for your business and have no major equipment to insure, this inexpensive policy may be suitable for you. An incidental home business endorsement only protects against responsibility for bodily injury. This minor insurance coverage is only suitable when the only concern you have is a slip and fall situation. If you have any equipment to ensure, are concerned about problems due to advertising or have any employees, this minor coverage is not suitable for you.
Related Questions
What if I decide not to get home based business insurance?
You may ask yourself “Why should I get home based business insurance if I am willing to take the risk?” As I mentioned above, depending on your homeowner’s insurance policy, you may not be permitted to operate a business in your home without risking violating your homeowner’s policy. Also, as previously mentioned, many large companies will refuse to do business with you without proof of insurance. Essentially, the marketplace may prevent you from taking the risk of going without business insurance.
Do I Need Business Vehicle Insurance?
You may often see companies advertising what they call “Vehicle Insurance.” This supposedly is necessary for people that use vehicles in their business (for example, Uber), whether for deliveries or other purposes (Pizza delivery). If you purchase good commercial liability and commercial property insurance policies or get one of the bundled Business Owner (BOP) policies, the only purpose served by vehicle insurance is lining the pockets of insurance agents with undeserved commissions, as the BOP covers the exact same thing.