Insuring Your Home Business

Be sure to treat your home business like a business -- including obtaining appropriate insurance for it.

If you operate a business from your home, it's important that you obtain adequate insurance for it, just as if you had a separate office. Even a small home business needs full protection against calamity.

Homeowners' Policies

Never rely exclusively on your normal homeowner's policy to protect your home business. If you do, bad things can happen:

• After your computer is stolen, you may find out that it's not covered by your homeowner's policy because business property is excluded.
• After your house burns down, you may find that the fire coverage is void because you didn't disclose your business use to the insurance company.
• After the UPS delivery person slips on your front porch and breaks his back, you may find you're not covered for injuries associated with business deliveries.

It's easy to avoid these nasty surprises. Sit down with your insurance agent and fully disclose your planned business operations. It's relatively inexpensive to add riders to your homeowner's policy to cover normal business risks. You may need separate policies for other business-related coverage.

Replacement Cost

When it comes to business equipment and furnishings, figure out how much it would cost for replacements after a fire, theft or other disaster. Don't overlook things such as the specialized business software you run on your computer. Depending on the nature of your home business, replacing equipment and furniture could run into many thousands of dollars. Ask your insurance agent what it takes to insure this valuable property, allowing for a good-sized deductible to keep costs down. Make sure that the coverage on equipment and furnishings is for the full replacement cost -- not just the depreciated value -- as can be the case in some homeowner's policies.

Liability Insurance

As mentioned, your homeowner's policy may not adequately protect you from liability to business visitors. Accidents -- such as people getting hurt when they trip and fall -- are more likely to happen at home than in a well-planned office building. Your homeowner's policy probably protects you if you're sued by a social guest or someone at your home for a nonbusiness purpose -- a florist's truck driver delivering flowers or the meter reader who's checking on gas usage. But it may not cover a business associate, employee, customer or delivery person who is injured on your property. The answer may be a rider to your homeowner's policy, or it may be a commercial general liability policy.

Also, think about the extent of your general liability coverage, should you accidentally injure someone or damage their property while away from home on business. You may need a rider or special policy to cover this risk. The Insurance Information Institute reports that many insurance companies are offering such riders for less than $200.

Some businesses, home-based or not, need special kinds of insurance. If you render professional services, look into professional liability insurance. If you manufacture, distribute or sell products that may hurt someone, think about products liability insurance. Also, if you have employees, you'll need to provide workers' compensation coverage.

Automobile Insurance

Of course you'll have auto liability insurance for cars or trucks that you use only for business. But if you do some business in your personal vehicle, be sure that your car insurance covers injuries that occur while you're on business errands. You may have to switch companies to find insurance that will cover business-related driving.

If you have employees who use their own cars for work errands or deliveries, you'll want to consider getting special insurance (called employer's non-owned automobile liability insurance).

Policies for Both Home and Business

Several insurance companies have developed special policies that cover both your home and a business run from your home. Typically, these policies cover your computer equipment and other business property -- whether used in your house or elsewhere -- and protect you from business liability lawsuits and loss of income. These policies can be less expensive than either adding riders to your home insurance or buying separate policies for home and business. But check the coverage carefully, as these policies tend to primarily address home offices and may not adequately insure you if, for example, you're a small manufacturer or a wholesaler who stores inventory in the basement.