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Home-Based Businesses: Is Homeowners Insurance Enough?

May 24th, 2023 | 7 min read

By Daniel J. Middleton

Many home-based business owners throughout Central New York think their homeowners insurance will cover them if something happens to their business property, customers, or income. However, this is a dangerous assumption that could put your business and your personal assets at risk.

Homeowners insurance has several limitations and exclusions for business-related property, liability, and income loss, such as low coverage limits, no coverage for other structures or data loss, and no coverage for business liability claims or loss of income.

Running a home-based business comes with its share of challenges. We understand this and know it takes a considerable amount of time, energy, and money to bring your passion to life.

We’re a small-town agency that specializes in helping home-based businesses like yours get the right insurance protection. Whether you sell products online, offer professional services, or cater to local customers, we have the experience and the expertise to help you find the best coverage for your specific needs.

Depending on the line of work you’re in, you might ask, “Is insurance really necessary?” or “How could my business really cause harm to anyone?”

These are common questions many home-based business owners have, but you may not realize the potential risks and liabilities you face every day. No matter what kind of business you do, there’s always a possibility that something could go wrong and cause harm to someone or something.

But by researching this matter, you’re being proactive and responsible. Obtaining insurance for your home-based business is a smart investment, and you’re demonstrating that you’re a small business owner who wants to protect their business and personal assets from unforeseen events.

In this article, you will learn why home-based business insurance is essential for any entrepreneur who runs a business from home, what types of coverages are available, and how they can protect you from various losses and lawsuits.

After reading to the end, you’ll know how to find affordable and flexible home-based business insurance that suits your specific needs.

Limitations of a Home Policy for Your Home-Based Business

Infographic-1_Home-Based-Businesses-Is-Homeowners-Insurance-EnoughDid you know that 51.6% of all US small businesses are home-based businesses? That means millions of entrepreneurs like you are facing unique risks every day. Home-based business insurance is a viable way to protect your dream.

If you think your homeowners insurance will cover you, it may not in certain cases. Homeowners insurance has several limitations and exclusions for business-related property, liability, and income loss, such as:

  • Homeowners insurance doesn’t cover personal liability claims related to your business activities or products. This means you have no protection if you’re sued by a client, customer, or vendor for causing property damage, bodily injury, or advertising injury.
  • Homeowners insurance doesn’t cover other structures used for business purposes, such as a detached garage or shed that stores boxes of saleable goods. This means you have no protection for those structures or their contents if they’re destroyed by a fire, storm, or other peril.
  • Homeowners insurance only covers up to $2,500 of business property within your home and $500 of business property away from your home. This is hardly enough to cover your business equipment, inventory, or records if they’re damaged or stolen.
  • Homeowners insurance doesn’t cover data loss, which can be a significant risk for businesses that store sensitive or valuable information on their computers or online platforms. This means you have no protection if your data is corrupted, deleted, or hacked.
  • Homeowners insurance doesn’t cover loss of income if your home is damaged and you can’t run your business. This means you have no protection if you lose revenue or incur extra expenses due to disruptions.

To put this into perspective, say you’re a home-based candle maker in North Syracuse who stores your full-year inventory of candles, wax, and fragrance oils in your basement.

You rely on a home policy for your business, but one night, a faulty electrical outlet sparks a fire that quickly spreads throughout your basement, destroying your inventory and damaging your home.

You have no insurance to cover your business property or income loss, and you have to pay for the fire damage and the lost inventory out of pocket. You lose thousands of dollars and months of work, and you have to start your business from scratch. Or maybe you’re a home-based graphic designer in Ithaca who creates logos and websites for local businesses, but you rely on homeowners insurance to protect your business activities.

One week, you design a logo for a body shop client in Utica who’s unhappy with the result and refuses to pay you.

The client then sues you for breach of contract and claims your logo infringes on a competitor’s trademark. You have no insurance to cover your professional liability or legal fees, and you have to defend yourself in court out of pocket.

You end up paying a hefty settlement and losing your client’s trust and referrals. You lose income and reputation, and you have to rebuild your portfolio, which takes years.

These are real-world scenarios that happen quite often. If faced with a similar situation, how would you cope with the financial and emotional consequences?

As demonstrated above, homeowners insurance may not provide adequate coverage for your home-based business. That’s why it’s important to review your homeowners policy and contact your insurance agent to discuss your business needs.

Depending on the type of business you have, your insurer may be able to offer you an endorsement or a separate policy (like those discussed below) that can fill the gaps in your coverage and protect your business from unexpected losses.

Don’t wait until it’s too late to find out that your home-based business is not covered by your homeowners insurance.

Benefits of Commercial Insurance for Your Home-Based Business

On the other hand, there is home-based business (or commercial) insurance. This commercial insurance can cover the risks and liabilities of running a business from your home. Home-based business insurance can include different coverages depending on your business needs, such as:

  • General liability insurance, which can pay for property damage, bodily injury, or advertising injury claims related to your business activities or products.
  • Professional liability insurance, which can pay for legal fees and damages if you’re sued for making a mistake or negligence in your professional services.
  • Workers compensation insurance, which can pay for medical bills and lost wages if you or your employees are injured or become ill while working for your business.
  • Commercial property insurance, which can pay for the repair or replacement of your business property, such as inventory, equipment, or files, if they’re damaged or stolen by a covered peril.
  • Business income protection, which can pay for your lost income and extra expenses if your home is damaged and you can’t run your business. This can protect you from financial hardship if your business operations are interrupted by a covered peril.

If you run a home-based child daycare in Herkimer, let’s say, and take care of several children in your living room, you’ll need more than a home policy to run your business.

For instance, one of the children trips over a toy and falls, breaking their arm. The child’s parents sue you for medical bills and pain and suffering. With general liability insurance in place, you’re covered for the bodily injury claim and any legal fees.

Or you’re a home-based dog groomer in Camden, New York, and offer grooming services for pets in your garage. One of the dogs bites you while you’re trimming its nails, causing a severe infection.

You have to go to the hospital and miss work for several days. Your workers comp coverage would cover your medical bills and lost income for those days. Learn why workers comp insurance is essential even if you’re the only employee at your home-based business.

Professional liability insurance can cover you if you’re a home-based doctor in Oswego, New York, and offer telemedicine consultations for patients online.

Say you prescribe a medication for a patient based on their symptoms, but the patient has an allergic reaction to the medication and suffers a severe rash. The patient sues you for malpractice and emotional distress. Your professional liability insurance would pay for the legal fees and damages.

All in all, commercial insurance for your home-based business can provide many benefits. It can help you pay for claims and lawsuits related to property damage, bodily injury, advertising injury, professional liability, workers compensation, and business income loss.

Having the proper coverage for your small home-based operation can safeguard your business and your personal assets against a host of possible mishaps and perils.

Choose the Right Type and Amount of Coverage for Your Home-Based Business

Choosing the right type and amount of coverage for your specific line of work is crucial for protecting your business from potential losses and lawsuits. Different types of businesses face different types of risks and liabilities, and you need to make sure your home-based business insurance policy covers all the scenarios that could affect you.

You also need to make sure that your coverage limits are high enough to cover the full extent of any damages or injuries that could occur as a result of your business activities or products. Underinsuring your business could leave you exposed to paying out of pocket for any costs that exceed your policy limits.

Overinsuring your business could result in paying more than you need for coverage you don’t use. That’s why it’s important to assess your business needs and compare different home-based business insurance options to find the best fit for your business.

By following the advice in this article, you’ll benefit from having the right insurance protection for your home-based business. You’ll be able to avoid the pitfalls of relying on your homeowners insurance, which may not cover your business property, liability, or income loss in certain instances.

You’ll be able to choose the type and amount of coverage that suits your specific business needs and risks. You’ll be able to protect your business and your personal assets from unexpected events that could cause harm to someone or something. You’ll also be able to achieve peace of mind and focus on growing your business.

Don’t overlook this advice. Without proper insurance, your home-based business could face financial ruin and legal trouble.

We care about your livelihood and your personal assets. We know how hard you work and how much you love what you do. We want to help you succeed and thrive.

As an agency that specializes in personal and commercial insurance, we can secure the right coverage for your business needs by tailoring coverage based on your chosen profession.

Once you contact us, we’ll learn about your business and find the best coverage for it. We’ll explore adding coverage to your homeowners policy or getting a separate home business policy.

We’ll identify the items your business depends on and help you determine their coverage amount. And we’ll assess your potential liability issues and customize protection unique to your business.

To get things started, click the Get a Quote button below. One of our friendly and knowledgeable insurance specialists will reach out to you.

You’re making a wise decision by considering a proper insurance policy for your home-based business. Not only will it provide peace of mind and safeguard your business and personal assets, but It can also help you grow and attract more customers by demonstrating your professionalism and credibility.

To learn more about insurance for home-based businesses like yours and the coverage options available to you, read “The Best Insurance Options for Home-Based Businesses.”

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Daniel J. Middleton

Daniel is an accomplished content creator. He has been working in publishing for almost two decades. Horan Companies hired Daniel as its content manager in November 2022. The agency entrusted its messaging to him. Since then, Daniel has written insurance articles, service pages, PDF guides, and more. All in an effort to educate CNY readers. He's helping them understand the world of insurance so they can make informed decisions.