by Mark “Gunny” Thomas
The two main types of insurance that you need to be concerned about as a home based business owner are liability and property damage. Liability protects you in the event someone gets injured on your premises or injured using your products. Property damage covers damage to a wide array of property items such as furniture, fixtures, machinery, equipment, supplies or any of the tools you use in your business.
There are also 3 basic levels of coverage available for home business owners:
1. A business owner’s policy (BOP) covers both liability and property damage coverage. The types of hazards covered include loss of data, software and hardware, income; loss due to theft; and general business liability. The structure which contains your business is also covered, so this might duplicate your homeowners’ coverage. A BOP also provides some coverage away from the business premises, including liability coverage for products you sell or parts you install. Keep in mind that items like flood protection are often not included and must be purchased in addition to your BOP.
2. A home office policy gives you a little less coverage than a BOP. This policy combines your homeowners and business insurance, reducing duplicate coverage or missing coverage. This type of policy is a good choice for a company with very few business visitors each week and quality computer equipment. It covers general business liability as well as lost income and ongoing expenses such as payroll for up to one year if the business has to cease operation due to damage to your home. You’ll also be covered for loss of records, accounts receivables, some off-site business property, fire, theft and personal liability. Many policies don’t cover natural disasters such as floods or earthquakes.
3. A “business pursuits” endorsement to your homeowner’s policy provides the least protection, and isn’t recommended for most home based businesses that have customers on site or costly equipment but does offer some minimal coverage.
While we are discussing business insurance, remember that if your business has employees, you will also need workers’ compensation insurance to cover on the job injuries for your employees. Check with your state employment office to be sure you are in compliance with state regulations.
Once you have adequate coverage in place, you still want to take any precautions you can to prevent having to use it! Protect yourself against crime, vandalism and disaster by installing smoke detectors, fire extinguishers and deadbolt locks. Install motion- sensitive outside lights. Do not allow your expensive office equipment to be visible to people passing by your office. Make sure you keep money and important documents in a fireproof safe.
Be proactive in preventing accidents from happening at your workplace. Make sure you use surge protectors on all your equipment and that electrical circuits aren’t overloaded. Keep high traffic areas in and around your place of work unobstructed and free of ice and snow. Establish and post safety rules for all employees.
To limit your liability you need to backup all important documents and keep these backed up files at another location or in a fire proof safe. Perform only those duties that you are qualified to do and don’t do anything that is outside of your area of expertise. Review all contracts and have your attorney review them to know what you are and aren’t liable for.