Insuring Your Home-Based Business

There’s No Place Like Home, But Are You Covered if Something Goes Wrong?

Who hasn’t dreamed of working from home? The prospect of being your own boss, setting your own hours and doing it all in the comfort of your own home is attractive to many people. Yet, running a home-based business without adequate insurance can turn that dream into a nightmare.

Why Homeowner’s and Tenant’s Insurance is not Enough

Many home-based business owners mistakenly believe that their current homeowner’s or tenant’s insurance policy will cover their new business enterprise. However, other than providing very limited coverage for defined business property, a homeowner’s policy is not intended or designed to cover the contents and unique liability risks associated with operating a business. For example, a house insurance policy does not extend liability coverage to clients or couriers visiting your home. Moreover, you should take into account the risk of taking business-related equipment outside of your home. If they are damaged or stolen, a regular homeowner’s policy will not cover those losses either.

Your Liability

Liability is perhaps the greatest risk associated with your home-based business. What if a client falls while walking up to your home? What if you are sued because of problems with the product or service you provided? Failing to account for this when running your home-based business could have disastrous results. The reality is that the legal system is increasingly being used to settle business disputes and you leave yourself very vulnerable by not having adequate business insurance. What you think you’re saving by not paying for an additional insurance policy is nothing compared to what you stand to lose.

To minimize potential losses, create a comprehensive risk management plan for your home-based business. The risk management process provides a clear and structured approach to identifying risks. It doesn’t need to be complicated, but should cover these three questions:

  1. What can go wrong?
  2. What will you do to prevent the harm from occurring and in response to the harm or loss?
  3. If something happens, how will you pay for it?

From keeping all walkways in and around your home clear to keeping your business-related inventory and computers protected from theft and viruses, managing risk is critical to the success of your home-based business. It will not only provide protection against direct financial loss but also help to safeguard the reputation and public image of your endeavour.

What Should You Do?

The best course of action is to speak to your insurance representative. Let him or her know about your home-based business and ask what kind of coverage you need to protect both your business and your home. Proper insurance coverage for your home-based business can help you to minimize the risk and maximize the excitement of being your own boss.