Most Businesses are Under Insured

As a businessperson who works out of your home, you may be erroneously relying on your homeowner’s policy to provide protection for your business activities.  Worse case scenario, if your house burns down, with all your business personal property inside, your business could be significantly impaired.  Proper coverage may result in a higher insurance payment, but could save you thousands of dollars in the event of a claim.

A typical homeowners policy provides only a few thousand dollars coverage for business equipment which may not be enough to cover all your business property.  It won’t protect you for business income loss arising from direct damage to your home/office.  And furthermore, most homeowners policies have specific exclusions for claims arising from business activity at your residence.

For instance, most homeowners policies only provide $2,500 for business equipment. However, the cost to replace your computer, printer, scanner, fax machine, desk, file cabinets, digital camera, PDA, etc. could easily exceed this.

Endorsements

You may be able to add a simple endorsement to your existing homeowners policy to double your standard coverage for business equipment.  These endorsements are generally offered in $2,500 increments.

In-Home Business Policies

An in-home business policy provides more comprehensive coverage for business equipment and liability than a homeowners policy endorsement.  These policies, which may also be called in-home business endorsements, vary significantly depending on the insurer.

You are probably looking at about $200 per year to insure your business property at a single location for up to $10,000. 

If you meet with clients in your home office, your primary risk exposures are liability for incidents occurring on your property (i.e. a visiting client slips and falls on ice on your driveway).  This is particularly critical if you are a sole-owner broker working out of your home. Liability coverage usually starts as low as $300,000.  However, given the nature of our current litigious society, a $1 million policy would be prudent.  Premium costs are based on how much coverage you buy.

Also, if you can’t operate your business because of damage to your home, your in-home policy can cover lost income and ongoing expenses, including payroll, for up to one year.

There’s also coverage available to protect against lost valuable papers, records, accounts receivable, off-site business property and equipment.   This generally does not extend to loss of electronic data so implementation of a regular backup and storage schedule would be wise.

Economic loss resulting from errors or omission in rendering professional services continues to be excluded from any homeowners endorsement or policy so a specific real estate errors & omissions policy is still necessary for brokers.

Finally, if you use your personal vehicle for business activities, make certain your auto policy will protect you from accidents that occur while you are conducting business.
Protect yourself and your business by taking the time to discuss your home office situation with your insurance professional.  A few extra dollars now could save you thousands of dollars in the event of a claim.