Understanding Home Business Insurance

Home business insurance offers protection in case of various financial losses. But you have several types of home business insurance to consider.

John Egan
Written byJohn Egan
John Egan
John Egan
  • 20+ years in insurance and personal finance content creation

  • Contributor to top brands like USA Today

John specializes in insurance, personal finance, real estate, and health and wellness. In 2022, he authored a guide on content marketing for beginners.

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Chris Schafer
Edited byChris Schafer
Chris Schafer
Chris SchaferSenior Editor
  • 15+ years in content creation

  • 7+ years in business and financial services content

Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.

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Updated December 4, 2024 | Reading time: 4 minutes

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Home business insurance provides a way to shield your home-based business from potentially huge financial losses due to a natural disaster, a lawsuit, or another covered peril. Experts recommend making this small-business insurance a priority for a home business.

Here’s what you should consider when looking at home business insurance so you can understand how this coverage benefits you and how it differs from a traditional home insurance policy.

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Types of home business insurance coverage

Several types of coverage make up the category of home business insurance, including general liability insurance, professional liability insurance, and workers’ compensation insurance.

Here’s a rundown of the kinds of insurance you might want to consider if you run a home business.

General liability insurance

General liability coverage protects your business against financial losses triggered by injury, property damage, medical expenses, libel, slander, lawsuit defense, court judgments, or settlement bonds.[1] For instance, if a customer breaks their arm while visiting your business, this policy might pay their medical bills.[2]

Professional liability insurance

Professional liability insurance protects you from financial losses arising from situations such as malpractice, errors, or negligence. For example, this coverage might benefit a massage therapist sued by a client over alleged skin damage.

Business property insurance

Property insurance protects your business in the case of damage to commercial property resulting from various events. These events include fire, smoke, hailstorms, windstorms, and vandalism. Property such as business equipment, furniture, and inventory might fall under this coverage umbrella.

Keep in mind that a business owner’s policy combines business property and business liability insurance into one package.

Business interruption insurance

Business interruption insurance, also known as business income insurance, protects against financial losses if a business shuts down due to property damage caused by a disaster. For example, a business might file a business interruption claim if a fire heavily damages the business’ property.

Workers’ compensation insurance

Workers’ compensation insurance covers medical costs and lost wages for employee injuries at work. For example, this coverage might kick in after a worker breaks their wrist by slipping and falling in a home office.

How to purchase home business insurance

When you shop for home business insurance, you can work with an insurance broker or agent or purchase coverage directly from an insurance company. As you decide which process is best for you, keep these things in mind.

  • An insurance broker doesn’t work for insurance companies like State Farm or The Hartford. Instead, they work on behalf of their customers to find the right insurance coverage by comparing coverage from a variety of insurance companies.

  • An insurance agent works on behalf of one or several insurance companies to sell coverage. A captive agent represents just one insurer, while an independent agent represents several insurers.

  • Rather than using the services of an insurance broker or agent, you can shop for home business insurance on your own and buy it directly from an insurer.

If you shop for home business insurance without help from an insurance broker or agent, you might end up paying more for coverage. Other mistakes that may come up include:

  • Focusing only on price: Ideally, you should find the coverage that best fits your needs instead of the coverage that turns out to be the cheapest. In some cases, the best coverage might not be the least expensive option.[3]

  • Failing to buy enough coverage: You might be tempted to skip coverage, such as professional liability coverage, that should be a must-have for your type of business. Just make sure you don’t ignore coverage that’ll be vital for your business going forward.

  • Not covering all your property: You might think that omitting a valuable item from your policy saves money on your premium. In the long run, though, omitting that item could be a costly error if it’s damaged or destroyed by an otherwise covered peril.

  • Making a mistake when filling out your application: When completing an insurance application, pay attention to the details. Leaving out or even lying about information could void your policy or lead to other consequences.

Avoiding the mistakes above can put you on the right path toward getting the right coverage for your business. Follow these five steps when shopping for and purchasing home business insurance.

  • illustration card https://a.storyblok.com/f/162273/x/abffe6238f/financial-protection.svg

    1. Assess your insurance needs

    You can do this on your own or with help from an insurance professional. As part of this assessment, evaluate your business’ risks and liabilities. For example, could your business face legal action or certain types of natural disasters that might lead to big financial losses? You could also consider whether you run the kind of business that would benefit from specialty coverage like professional liability or workers’ compensation insurance.

  • illustration card https://a.storyblok.com/f/162273/150x150/5affd49ed7/business-96x96-orange_014-report.svg

    2. Understand your business assets

    Take inventory of your assets, including equipment and furniture, so you can fully cover your business property. This inventory list should be thorough and include all the assets you need for business operations.

  • illustration card https://a.storyblok.com/f/162273/150x150/17ba1d30a5/contact-us-96x96-blue_031-newspaper.svg

    3. Learn legal requirements and regulations

    Before buying coverage, review all applicable legal requirements and regulations affecting your business. For instance, what do your state laws require for workers’ compensation coverage? Understanding these requirements will put you in a better position to buy coverage that matches your needs.

  • illustration card https://a.storyblok.com/f/162273/x/fa11c1fe75/comparison-website.svg

    4. Compare home-based insurance quotes

    After obtaining several quotes for insurance to cover your home-based business, weigh the pros and cons of each quote. This comparison should be about more than just price. Would the policy offer adequate coverage? Would you be able to afford the premium? Does the coverage offer protection for the most common potential threats facing your business?

  • illustration card https://a.storyblok.com/f/162273/150x150/5b8df1ba63/contact-us-96x96-green_001-computer.svg

    5. Apply for a home-based business insurance policy

    Before you fill out a business insurance application, collect all the necessary information related to your business. This should include when your business started operating, what, if any, insurance already covers your business, and what your business does. You typically need to supply these and other details on your application.

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Home business insurance FAQs

Some small-business owners depend on home business insurance to help ease financial losses that would damage their home-based business or even force it to shut down. If you still have questions about this coverage type, the following answers should help.

  • What is home business insurance, and why do you need it?

    Home business insurance covers a number of circumstances that can harm your business. Without this coverage, you might be fully responsible for costs like legal fees if a customer sues your business or repair bills if a natural disaster hits your property.

  • How is home business insurance different from homeowners insurance?

    Generally, home business insurance offers broader coverage for business assets and business liability than a homeowners policy does.[4]

  • How much does home business insurance cost, and what factors influence the price?

    Home business policies typically cost between $950 and $1,900 per year. Factors that influence the price of home business insurance include a business’ risks, size, claims history, and coverage limits.

Sources

  1. U.S. Small Business Admistration. "Get business insurance."
  2. NAIC. "Business Interruption/Businessowner's Policies (BOP)."
  3. IMA Select. "IMA Select: 8 Common Small Business Insurance Mistakes."
  4. Insurance Information Institute. "Insuring Your Home-based Business."
John Egan
John Egan

John Egan is a freelance writer and content marketing strategist in Austin, Texas. His specialties include personal finance, real estate, and health and wellness. John’s work has been published by outlets such as CreditCard.com, Bankrate, Forbes Advisor, Experian, Capital One, The Balance and U.S. News & World Report. He is the author of The Stripped-Down Guide to Content Marketing.

John has been a contributor at Insurify since October 2022.

Chris Schafer
Edited byChris SchaferSenior Editor
Chris Schafer
Chris SchaferSenior Editor
  • 15+ years in content creation

  • 7+ years in business and financial services content

Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.

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