Home Office Insurance: Are You Covered?

How to make sure your home-based business is properly insured and does not leave you or your business at risk.
Running a home business can provide low overhead, generous tax deductions and minimal startup costs, not to mention the convenience of working in your bedroom slippers. However, business owners nestled at home may have a false sense of security when it comes to their property and liability risks, says David Golden, director of commercial lines and professional liability insurance expert at the Des Plaines, Ill.-based Property Casualty Insurers Association of America.

"If you're operating out of the house, you might as well plan on not looking to your homeowner's policy, because what it will cover in the way of business pursuits is very limited," Golden says.

Most homeowners' policies have specific exclusions for business pursuits, he says. For example, an average homeowner's policy may cover only about $2,500 worth of business property, such as desks, chairs and company records. If this figure seems insufficient to cover your equipment, you may need to purchase a business owners policy. Also, any business property taken off your premises—laptop computer and tools—typically qualifies for only 10% (usually up to $1,500, depending on the type of equipment) of the coverage you ordinarily would receive if you used the equipment at home.

Be especially cautious about business property that is stored in a garage. If it's in a garage used exclusively for business purposes, there may be no coverage under your homeowner's policy. Otherwise, storage of business property in a garage used for other purposes (such as parking a personal vehicle) typically is covered up to $2,500. If you use your home office for administration, but provide services elsewhere, repair services or construction work, for example, you likely need coverage not provided by a homeowner's policy.

A myriad of considerations—including your business type, personal possessions and number of employees—go into selecting the right policy at an affordable cost. Here are some tips from Golden and Will Kline, a Fort Worth, Texas-based licensed agent for the online broker InsureZone, a service provider for Wells Fargo Insurance, Inc.
Identify Risk Areas

"There are many different types of liabilities to be covered for a business," Kline says. "Business liability may protect you from claims arising from a customer's bodily or personal injuries."

Your business policy may be customized to fit your particular business needs, Golden says. For example, you may need malpractice insurance if you're a psychologist offering advice. Or, if you're taking credit cards for a product you're selling over the Internet, you may need a tailored liability policy. Not only are you responsible for other people's personal information, but you may also need product liability insurance to cover you in the event your product doesn't perform correctly.

You also may want contents insurance to cover business equipment and furnishings that your homeowner's policy does not, Kline says. Some business owners' policies include breakdown and business income coverage, he adds. Consider a Business Owners Policy, which combines property and liability coverage into one policy. A business owner's policy generally includes additional coverage options at no additional premium. Most insurance carriers have customized business owners' policies for particular industries.

If you have employees, many insurance companies offer employment practices liability insurance as part of their business owner's policy or as a stand-alone policy. Employment practices liability insurance may cover wrongful termination, sexual harassment, discrimination, mental anguish, and other employment related litigation, Kline says.

What if a client or employee slips on your kitchen floor and gets hurt? "If the person was at your home for business, there may not be coverage under a regular homeowner's policy. The loss may be denied. General liability insurance provided under a business owner's policy or a workers compensation policy for your business would likely cover it," Golden says. "If you happen to have the business insurance and a homeowner's policy with the same carrier, it's that much simpler for you."

Ensure Full Coverage

Stay in regular contact with an insurance agent and an attorney who understand your business so that all of your risk exposures are assessed, Golden says. "They may help you prevent the loss from ever happening in the first place," he says.

You should talk periodically with your agent and lawyer about what you are doing with the business, they can help you determine the appropriate frequency, whether it's once a quarter for a quickly-evolving Internet business or once a year for a store owner who is experiencing little change.

Insurance Tips for startup, established and mature companies

Startup—Be sure to plan not only for your business' current needs, but for growth and change; keep your insurance agent and lawyer informed.

Established—Conduct periodic reviews of your coverage. Is it appropriate for your current activities? If you have grown from a one-person to a six-person operation, for example, consider policies that protect you from employee issues, such as Employment Practices Liability Insurance (EPLI).

Mature—Keep tabs on issues within the insurance industry. Evaluate the safety of your operation. Carefully review expanding areas of law regarding employee rights.

Get in touch with Wells Fargo Insurance

Protect your business with a business owner's policy, business auto, workers' compensation or umbrella liability policy. Wells Fargo Insurance lets you shop online for small business insurance solutions, from property and casualty insurance to group health, even agribusiness insurance.

Contact:

John Archer


303-795-8527

or via email:

jarcher@aspensky.com

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