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Does My Home-Based Business Really Need Commercial Insurance?

June 17, 2013

This is a question we get a lot. The short answer is yes. It’s a good idea to at least purchase a Commercial General Liability policy for your home-based business. This is true even if the property you use to conduct your business is adequately covered under your Homeowner’s policy, relieving the need for the bundled property coverages included in a BOP. A General Liability policy helps protect you and your business in the event that people or property are injured as a result of your business operations. This precaution proves especially important for sole-proprietorships and certain types of partnerships that allow judgments to be paid out of owners’ personal assets. In these cases, a Commercial General Liability policy offers the added benefit of protecting you against personal liability for your business’ wrongs.

So, our most important take away is this: Don’t forego liability protection just because you think your business’ property may be covered under your Homeowner’s insurance or an equivalent property policy.

At the same time, all home-based businesses are different and some involve risk exposures that require particular solutions beyond a basic Commercial General Liability policy. While such exposures are best explored with a qualified agent on a case-by-case basis, here are a few “flags” to look out for when considering other coverages to purchase for your home-based business:

•   If you provide professional advice (e.g. a lawyer or accountant) or health services (e.g. a chiropractor or psychiatrist) you may need professional liability coverage in the form of an E&O or Medical Malpractice policy, respectively.

•   If your business owns or operates a group of “working vehicles” (e.g. landscaping trucks or vans transporting contractor’s equipment) you may want to look into a Commercial Auto or Fleet policy.

•   If, like a contractor, your business involves transporting expensive equipment away from home, you may need to insure such equipment with an Inland Marine policy.

•   If your Homeowner’s policy doesn’t cover some of the specialty equipment used in your business or if the value of such equipment exceeds the limits of the personal property coverage provided by your Homeowner’s policy, you may need to insure this equipment with an Inland Marine policy (e.g. some computers and expensive data processing equipment).

•   If your business employs staff (or even volunteers) you may need to purchase Workers’ Compensation insurance in accordance with state laws.

In conclusion, don’t assume that just because you’re operating your business from home that your home insurance covers all your risk exposures. Take care to protect yourself and seek qualified help.

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