More than half of the businesses in the United States operate out of private homes. Many of these home-based business owners mistakenly believe their Homeowner's Insurance policy protects their commercial assets. In reality, home-based business owners need to purchase the appropriate commercial insurance just like any other small-business owner.
The wide variety of at-home businesses makes identifying the appropriate policies for your client a little tricky. However, knowing that their Homeowner's Insurance leaves their commercial assets vulnerable gives you a good starting point. For reference, here are several policies home-based business owners should consider purchasing:
General Liability Insurance
No business is too small to be sued. General Liability Insurance protects your client when a third party claims they suffered bodily injuries or property damage because of your client. If a delivery person is injured while dropping off a work-related package to your client's home, a GL policy may pay for the deliveryman's medical expenses. Additionally, General Liability travels with your client, protecting them at appointments, events, or sales meetings. For example, if a your client's handcrafted candles cause a fire at a craft show, their GL policy may pay attorney fees, court costs, and judgments or settlements if they are sued for damages.
Property Insurance / Business Owner's Policy (BOP)
Your client's home-based business probably relies on tools, supplies, equipment, and inventory that are not covered by their Homeowner's policy - even if they are stored in their residence. Property Insurance pays for the repair or replacement of business materials if they are lost or damaged by a covered event. Your client might also qualify for a Business Owner's Policy (BOP) , which bundles General Liability and Property Insurance in a convenient and affordable package.
Errors and Omissions (E&O) / Professional Liability Insurance
If your client provides professional services, guidance, or advice from their home, they should consider purchasing Errors and Omissions (E&O) coverage. Also called Professional Liability Insurance, this policy protects your client when their customers claim they suffered financial losses because of your client's negligence. For example, say a customer accuses your client, a freelance tax advisor, of making an oversight on their annual return. E&O Insurance covers the legal expenses associated with the claim.
Hired and Non-Owned Auto Insurance
Even though your client conducts business from their home, chances are they'll need to drive to events, appointments, worksites, and meetings. Some may choose to rent a car, subcontract a delivery driver, or hire a car-sharing service. Others may have employees use personal vehicles for work errands. Hired / Non-Owned Auto Insurance can cover liability expenses in case an accident occurs in these non-owned vehicles.
Workers' Compensation Insurance
Most states mandate that employers carry Workers' Compensation Insurance . This covers medical expenses and lost income when your client's employees suffer occupational injuries or illnesses. Even if your client runs a one-person home-based business, they may still want Workers' Compensation to protect themselves when a work ailment keeps them from their job.