Home-based businesses have become increasingly popular in recent years, with more individuals choosing to operate their companies from the comfort of their residences. However, this shift in the business landscape raises important considerations for home insurance coverage. Understanding how your home-based business can impact your insurance needs ensures adequate personal and business assets protection.

Home Insurance Coverage for Business Use

Traditional homeowners insurance policies are typically designed to cover personal property and liabilities associated with a residential property. However, they may not provide adequate coverage for business operations conducted within the home.

Homeowners who run a business from their residence should inquire about home insurance policies or add ons offering business use coverage. These specialized policies can help protect business assets, inventory, and provide liability coverage in case of accidents or damages related to the business.

Why you need specialized insurance coverage for your home business

  • Traditional homeowners insurance policies may not cover business-related property damage or losses.
  • If your home-based business requires specialized equipment, tools, or inventory, standard policies may not fully protect these assets.
  • In the event of accidents or damages caused by your business activities, you may face liability claims not covered by regular homeowners insurance.

Insurance Options for Home-Based Businesses

The type of home-based business insurance you need depends on the size and nature of your operation. Many insurers specifically define what constitutes an eligible business, even if it doesn’t generate a profit.

Below are a few questions to ask yourself to determine whether you need home-based business insurance:

  • Do customers or clients come to my home?
  • Do I keep inventory or supplies in my home or at off-site job locations?
  • Would I lose income if I had to close my business because of damage to my home?
  • Do I have employees working in or outside of my home?
  • Do I maintain client or employee records on my computer?

One insurance option is a home business policy in the form of an endorsement – or rider – added to a standard homeowner’s insurance policy. These add-ons come in a few shapes and sizes.

Permitted Incidental Occupancies Endorsement

A permitted incidental occupancies endorsement is for professionals who keep a secondary home office. It can be a great option for freelancers or someone who works from home on a regular basis. A permitted incidental occupancies endorsement is ideal if your home office is separate from your primary office. Business activity should ideally be limited to general tasks such as phone calls, record keeping, or paperwork. Public access should be limited.

Home Business Endorsement

A home business endorsement is more robust than the permitted incidental occupancies add-on. Instead of simply providing coverage for occasional business activity, the home business endorsement covers a wider variety of home-based business activities. A home business endorsement may suit the needs of many at-home businesses. 

Here are four primary business types that a home business endorsement may cover:

  • Crafts: This extends to the sales of craft items produced in homes, such as quilts.
  • Office: This category includes those who do administrative or clerical tasks, such as answering phones or writing.
  • Sales: This category includes sales of non-craft products such as cosmetics or jewelry.
  • Service: This category extends to those who offer a service such as bike repair or dog-sitting.

To be eligible for a home business endorsement, your business must:

  • Generate less than $250,000 per year
  • Be owned by the named insured on the homeowner’s policy
  • Operate primarily from the residence covered in the policy
  • Not produce or distribute food or personal care items (national brands like Avon or Mary Kay are allowed)

Choosing the Best Insurance for Your Home-Based Business

When choosing the best type of insurance for your home business, consider the following questions:

  • What is my actual business model?
  • Do I have business equipment?
  • Does my business own property?
  • How much coverage do I want, and what is my tolerance for deductibles?

When running a home-based business, protecting your assets and mitigating potential risks should be a top priority. Home business insurance provides the necessary coverage for your business operations, ensuring you are adequately protected from financial losses. You can customize an insurance policy that addresses your specific requirements by understanding the unique needs and risks associated with operating a business from your home.

Consulting with an insurance professional is key to finding the right home business insurance that provides comprehensive coverage for your business operations. They can guide you through the process, assess your needs, and recommend the appropriate policy that aligns with your business requirements. Don’t wait until an unexpected incident occurs to realize the importance of home business insurance. Take the necessary steps to safeguard your business and assets.