These days, many Americans either work from home or operate their business from their home. However, most traditional homeowners insurance policies won’t cover claims related to your home office or home business activities, including personal property and liability coverage

Standard homeowners insurance policies generally cover up to $2,500 of protection for onsite business equipment including electronics and supplies, and $500 for off-premises protection. They are also unlikely to provide liability coverage for business-related activities and actions, which may endanger your home office and business if you don’t have supplemental coverage. 

Here’s one quick fix: compare home insurance quotes with Insurify and find the right provider for you and your home-based business in minutes with Insurify.

Homeowners Insurance vs. Home Business Coverage

Most standard homeowners insurance policies will not provide adequate coverage to your home-based business, so you may require additional coverage. The size and nature of the business operated out of your home will determine what type of business property insurance you may need to obtain to properly protect it. States have differing regulations in regard to what is considered a “home business,” as these definitions determine different tax breaks, fees, etc.

Types of Home Business Insurance

Home-based business owners have options when it comes to business insurance policies. The first form is known as an endorsement or rider. Generally, endorsements/riders come as add-ons to traditional homeowners insurance policy

Permitted Incidental Occupancy Endorsement 

For freelancers who work from home in a secondary office, or other professionals who work outside of a main office most of the time (e.g. contractors, lawyers, bookkeepers, and editors), a Permitted Incidental Occupancy Endorsement (type HO 04 42) is an ideal option. This includes professionals who have a traditional out-of-home office, but also have a supplemental home office used for a general business activity like phone calls and paperwork. When added to a standard home insurance policy, Permitted Incidental Occupancy Endorsement can protect home offices that act as secondary workspaces to a professional. Other professionals can consider an endorsement of this nature if their business is conducted at home on a more limited, part-time basis (e.g. music teachers, bakers, photographers, and crafters). 

Note: If you conduct business in a separate building on your property, like a garage, workshop, or shed, your homeowners insurance company may charge extra fees. 

If you opt into a Permitted Incidental Occupancy Endorsement for limited business activity that takes place in your home, you may wonder what your small business or home office is protected from. Of course, limits may be adjusted according to your insurance company’s coverage options and offerings, but in general, business property coverage will offer liability coverage, business property protection, and other insurance needs. Business liability limits can, in general, be adjusted from $2,500 in coverage to up to $10,000.

It’s important to note that not all of your business assets will be covered by Permitted Incidental Occupancies Endorsements. These policies do not include protection against loss of income due to property damage or business interruption, medical coverage, or professional liability insurance. Not all home-run businesses are eligible for Permitted Incidental Occupancies Endorsements due to their unique risks and need for more robust business insurance. These businesses may include auto body shops, daycare centers, catering services, or retail shops.

Home Business Endorsements

While Permitted Incidental Occupancy Endorsement provides coverage for professionals working from home offices on a part-time or limited basis, or as a secondary workspace, Home Business Endorsements (HO 07 01) cover home-based business activity on a much broader scale. Though not an exhaustive business owner’s policy, Home Business Endorsements will suffice for most small businesses operated out of a home. 

A small business must meet a few criteria to be eligible for a Home Business Endorsement, beyond simply proving that occasional business activities are performed on the premises. Businesses must generate under $250,000 annually, be owned by the same individual as who is named on the standard homeowners insurance policy, operate primarily at the residence, and must not be producers or distributors of food or personal care products (with the exception of some big-name door to door social sales companies like Mary Kay and Avon). 

Home Business Insurance Endorsements are feasible options for four main business categories. If your small business fits the above criteria and falls into one of these categories, a home business insurance endorsement might be the right choice for you:

Crafts Production and sales of crafts and homemade goods out of a home.
Offices Use of space for business activities including administrative and clerical tasks like phone calls and record keeping.
Sales Sales of non-craft goods out of a household.
Services Businesses offering goods and services like bike repairs, music lessons, or childcare.

Home Business Endorsements apply to home-based businesses with up to three in-house employees and provide liability coverage, medical payments, business income and expenses, and business equipment protections. It is important to note that Home Business Endorsements do not provide the same protections as commercial insurance policies, such as professional liability coverage or commercial liability. Financial advisors, lawyers, or other professionals who regularly advise f  clients will want to ensure that their policy of choice does in fact include commercial liability protection, excluding a Home Business Endorsements as their best option. Other services related to home-based businesses may not be included, such as landscaping or daycare insurance. 

There are additional add-ons to most Home Business Endorsements that can provide other critical coverage to valuable business property. These supplemental coverage options can include protections for valuable papers and records and loss payable provisions, which provide businesses coverage for equipment and property. Extensive coverage can be added to distribution channels associated with a home-based business, like vendors or deliverers.  

Beyond Endorsements: Business Owners Policies

Some home-based businesses may find themselves ineligible for Home Business Endorsements. 

If that’s the case, a Business Owners Policy (BOP) is also an option. BOPs provide general liability insurance coverage and property coverage to business owners. Liability coverage can protect a small business owner from lawsuits in the case of an injury of an affiliate on their watch. The business property coverage provides protection for documents and records, plus protection for business income and extra expenses. 

To be eligible for a Business Owners Policy, your home business must meet the following eligibility criteria:

  • Operating area must be less than 25,000 square feet
  • Business must generate less than $3 million annually in revenue
  • Business cannot fall in one of the following categories
    • Manufacturing
    • Banking
    • Hospitality (bars, pubs, restaurants)
    • Car storage
    • Auto repair
    • Amusement parks

Homeowners Insurance for Home-Based Business Owners and Employees

An increased percentage of American companies are allowing employees to work remotely from home due to the COVID-19 pandemic. If a business is working remotely, employees can often piggyback onto their employer’s business insurance, providing protection against damage on business equipment such as laptops and documents that are being used inside employees’ homes. As an employee, if you’re required to use your vehicle for business use, your automobile may be covered by your company’s business insurance as well. 

Every employer will have their own policies and regulations, so before relying on a business insurance policy to take care of any accidents while you’re on the clock, be sure to double-check that you’re covered. 

Home-Based Business Insurance: Frequently Asked Questions

I run a small side business selling baked goods out of my kitchen. Does my homeowners insurance cover my business operations?

Firstly, in order to qualify for home-based business-coverage, your small business must be properly declared with your municipality. Once that is squared away, you may be able to tack on protections for your business to your standard homeowners policy. This can be done by adding endorsements to your home insurance. If your small business requires more coverage than basic endorsements offer, you may need to level-up to a Business Owners Policy or BOP. 

What type of coverage will my Home-Based Business insurance offer?

Depending on your business’s unique needs and your homeowners insurance company’s offerings, the types of coverage your Home-Based Business insurance policy will offer will differ. Most home business policies will offer some sort of general liability coverage and property protection. You may attach supplemental coverage to these policies, such as auto insurance for vehicles used for business purposes, or special records, data, and cyber-security protections. 

I am currently working from home, not at my employer’s office. Is my laptop protected?

If you’re working from home temporarily or for the foreseeable future, you will want to confirm with your employer that your business-related equipment is protected while being used in your home. We all know accidents happen, but if your toddler accidentally drops a cup of milk on your work laptop, you want to be sure you’ll be off the hook before it's too late.

Where can I compare home insurance quotes online?

Insurify, the online quotes comparison platform, can help you compare numerous quotes in just two minutes, all for free. Check it out and start saving. 

Conclusion: Properly Protecting Your Home-Based Business

Owners of home-based businesses of every size will want to consider what protections their standard homeowners insurance policy offers them, and what they’ll want to obtain as additional protection. In order to properly protect your business’ equipment, assets, and liability, proper insurance is necessary. 

To compare standard homeowners insurance and business insurance quotes, use Insurify to compare multiple homeowners insurance quotes in minutes. Make sure your home policy covers all your business needs—don’t settle for less!

 

 

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Updated June 4, 2020

Jackie Cohen received her B.A. in Global Media and Public Relations from the University of Massachusetts, Amherst. Currently based in Boston, MA, she works as a content writer for Insurify. An avid globe-trotter and foodie, Jackie spends her spare time adventuring far and near.