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Since the dawn of the COVID-19 pandemic, many people have turned to entrepreneurship for extra income, using their homes as their headquarters. Indeed, a small home-based business is more convenient and budget-friendly, as it avoids hefty lease costs and food and transportation expenses.
What’s more, people are confident to start a home-based business because their abodes are most likely covered byhomeowners insurance. More specifically, condo insurance for condo dwellers. With guaranteed coverage after a hurricane or theft, they can recover from property damage fast without out-of-pocket costs.
But does your coverage include your home-based business property?
Admittedly, you might be in a tricky situation. Homeowners insurance expressly states that it covers personal property, so if you use your home for business without your insurer’s knowledge, then you might risk invalidating your policy.
What is Homeowners Insurance?
Your homeowners insurance covers losses and damages to your home. Properties covered include the furnishings and other assets placed in your abode. It also supplies liability coverage for accidents that occurred in your home or within your property.
So if your furniture was damaged by a hurricane or stolen by burglars, your homeowner’s insurance will allow you to obtain claims so that you won’t spend money for a replacement likewise, if your guest has slipped and sustained an injury. As a result, your homeowners insurance can give you funds to pay for their medical bills.
How to Protect Your Home-based Business
While not useless, a homeowner’s insurance alone isn’t enough to protect your business against damage and losses. Hence, you should also invest in home-based business insurance.
Such insurance package may include coverage for the following:
- Business property. This refers to your home office equipment. A business contents insurance should specifically be provided by your home insurance to ensure coverage to business property. Note, however, that your policy can only cover your business equipment if it’s in your home. Anything you use outside, like a laptop or cellphone, may require separate contents and property insurance.
- General liability. This is similar to the liability coverage inhomeowners insurance. But in this case, the coverage will be provided if an employee or client suffers an accident within your home. It is advisable to get a policy with this coverage if your home-based business involves risky work.
- Business vehicle. Your personal auto insurance will not provide coverage for accidents owing to business activities. That’s because, like homeowner’s insurance, the policy also expressly states that you should use your car for personal purposes only. Your insurer may cancel your policy if they found out that you used the car for business, so get business insurance with coverage for a business vehicle.
- Product liability. If you’re selling products, product liability coverage will protect you from liability if one of your products malfunction or underperform.
- Professional liability. If you’re a service business, professional liability coverage protects your personal assets from customers claiming that they’ve suffered damages due to your business. The coverage will also compensate customers who have indeed suffered damages due to your services.
- Errors and omission. If your home-based business involves charging customers for advice, an errors and omission coverage gives you protection against customers claiming that your advice is unhelpful due to your negligence. This coverage also works on a home business that requires you to provide service on a customer’s site.
- Business interruption. This refers to a suspension of operations due to floods, fires, and other disasters. Business interruption insurance will cover your lost revenue until you can resume business.
Protecting Your Business From Disaster
Even with business interruption insurance available, it’s still wiser to have a business continuity plan. It ensures that you can maintain your operations despite a disaster. This is especially beneficial nowadays, with people’s income on the line due to the pandemic.
To make an effective continuity plan, determine first the main risks of your home-based business. If you live in a coastal area, hurricanes are probably your biggest threat, so center your plans around it.
After identifying the main risks, decide what’s essential for your business to run again if the disaster disrupts your operations. The essentials are usually personal data, equipment, financial allocation, infrastructure protection, and key employees.
You may also need an evacuation plan if it’s a natural disaster that halts your operations. While at it, invest in a business emergency kit as well, and ensure that your data will stay well-protected. If you’d be closed for a period, assign someone who will spread the news.
Considering the complexities of insurances, it seems intimidating to run a home-based business, but it isn’t. The events will be more complicated if you skip the right insurance, so don’t let the information overload discourage you.
These are good points to consider when purchasing homeowners insurance, especially in regard to location. You mentioned potential environmental conditions before, and these ring true, especially in areas where hurricanes and earthquakes have been known to occur.
Very true.