Do you have a Home based business?
Over 200,000 Ohioans operate a business from their home and it’s estimated that another 75,000 homed based businesses will be formed in the next four years here in Ohio. My guess is that the majority of these people have no liability insurance, with only limited property coverage for their computers, furniture and equipment. Studies show that many people assume their home, condo or renters policy will protect them against lawsuits resulting from the business, and that business property destroyed while in their house or car will be covered. I understand this thinking because the business owner is working from home. However, homeowner’s polices were created to handle the needs of people owning, and running a household, not for running a business. Without getting too deep into policy details here, there is an exclusion for “liability arising from the insured’s business activities.” This can be as simple as a delivery person or client at your house for the business getting injured. Your homeowner company will not defend you, or pay the claim. The business doesn’t have to be full time, so a person working on a part time, or occasional basis, will also trigger the exclusion. Most policies have an income threshold that needs cleared for the exclusion to apply, usually $2000. This allows for an occasional garage sale, etc. Also, volunteering, when reimbursed for expenses would not be considered a business pursuit.
Homeowner’s policies typically have $2500 available for business personal property while at the residence, and much less than that away from home, usually only $500. Certain types of businesses may also be eligible for liability protection on the home policy, so check with us for eligibility. If you’re employed, and work from home, make certain that your employer has liability protection that extends to you personally, should you be named in a lawsuit. Also, any business property owned by an employer will not be covered on your policy. It’s a good idea that your employer knows upfront that their property needs protected on their business insurance policy. One final, but very important consideration has to do with using a detached structure for business purposes. If this is the case, your homeowner’s policy will not respond to the damage or destruction to that structure. They will deny the claim because of the business use. If you’re using an outbuilding as a woodworking, or repair shop, for example, and want the building fixed if it’s damaged, you must get a commercial policy for that structure.
Depending on the type of home-based business that you have, insurance premiums can be very affordable. A “liability only” policy can be as low as $160 per year, and a business owners policy (BOP) can be purchased for as low as $225. BOP’s provide not only liability and property protection, but also business interruption (lost income and ongoing expenses), accounts receivable, specialized coverage for electronic equipment and more. Certain professions, including consultants, need professional liability insurance. This protects you if a client claims that your services, or lack thereof, caused them to suffer a financial loss.