Is home business insurance required?
Some types of business insurance may be a necessity to get a professional license or to sign a contract with some clients – even if you work from home.
But even if it’s not a requirement, business insurance for home workers is often a good idea. Chances are your homeowners insurance won’t cover a lot of scenarios for your business.
Your homeowners policy may provide some coverage for your business property, but limits are typically low — often around $2,500. You might not have enough coverage if the value of your business property, such as computer equipment or product inventory, is more than a couple of thousand dollars.
If clients visit your home, you sell products online or you provide professional services, your business risks are beyond just your physical equipment.
Compare home business insurance to homeowners insurance
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Home business insurance coverage
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Homeowners insurance
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Could it cover business equipment, like computers and furniture?
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Yes
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Often limited or excluded
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Could it cover your business products and inventory?
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Yes
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Often limited or excluded
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Can it cover liability claims against your business or products?
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Yes
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Often excluded
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Can it cover lost business income if you have to close temporarily after a covered event?
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Yes
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Often excluded
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Could it cover building structural damage?
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No
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Yes
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Could it cover personal belongings not related to your business?
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No
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Yes
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What could home based business insurance cover?
Homeowners insurance is built to protect your home and personal belongings — not your business. If your home doubles as your office or workplace, your insurance needs change.
- If a fire, theft, burst water pipe or other covered event damages your business property, such as laptops, business furniture, your products or your inventory, business insurance – not homeowners insurance – could help.
- If a visiting client or delivery person trips at your home office and asks you to cover their medical bills, homeowners insurance may not protect you.**
- If your products cause property damage or harm to a customer, your homeowners policy probably won’t help if they take legal action against you to recover damages.
- If you work as a consultant or advisor and sell your professional services rather than physical goods, your homeowners coverage is unlikely to help you if a client claims that your professional error caused them financial harm.
Which types of business insurance are best for home based business owners?
Home business insurance can include several types of coverage, depending on how you operate.
1. Commercial Property insurance
For many home based businesses, commercial property insurance coverage is important protection for business equipment, inventory and, in some cases, lost income after a covered event. If a covered event — like a fire, theft or burst water pipe — damages your business property, this coverage could help to repair or replace it.
Business personal property insurance is a part of commercial property coverage that can help protect the equipment and materials you rely on to run your business. This can include computers, furniture, tools, equipment or inventory.
Business income insurance (also called business interruption insurance) is another part of commercial property insurance. It can help replace lost income if you have to close temporarily for repairs after a covered event.
Equipment breakdown coverage, an optional add-on to commercial property coverage protection, could help if essential equipment stops working due to mechanical or electrical failure — like a power surge, short circuit or motor burnout. This could be a big help to home based businesses that rely on high-performance computers, specialized tools or production equipment.
2. Professional Liability insurance (E&O insurance)
Professional liability insurance, also called errors and omissions insurance or E&O in some professions, is another type of liability coverage that could be helpful for businesses that provide services or consultations. It can provide financial protection to defend your company if you are accused of professional negligence or making a business mistake that costs a client money.
This type of business insurance is often most relevant for consultants, freelancers, financial services, real estate and other service-based professionals working from home.
3. General Liability insurance
General liability insurance for home businesses could help you if a non-employee, such as a client or a delivery person, gets hurt at your business. Commercial liability coverage could also help if your business accidentally causes property damage to someone else’s stuff.
For example, if a client visits your home office and trips over loose carpeting and injures themselves, or you accidentally damage a customer’s property while working offsite, home based business liability insurance may help cover medical expenses, repair costs and legal expenses.
Product liability coverage, a part of general liability, could help protect retail businesses that manufacture or sell physical products if a customer claims a product caused injury or damage.
4. Cyber Liability insurance
If your home business stores digital client information or accepts online payments you may face cyber risks — even if you’re a one-person operation.
Cyber insurance, an optional add-on to either your general liability or professional liability policy, could help cover expenses related to data breaches, including notification costs and some legal fees and recovery efforts.
How much does home insurance cost?
Home based business insurance costs depend on the type of work you do, the value of your equipment and the level of coverage you choose. In general, businesses with greater risks pay more than those with fewer risks.
Your premium depends on several factors, including:
- The type of products or services you provide
- The value of your business property
- Your annual revenue
- How many employees you have
- Where your business is located
- How long you’ve been in business
- Your claims history
- The coverage limits and deductibles you choose
Because every home-based business is different, the best way to see the exact cost specific to your business is to get a free, no-obligation quote. At ERGO NEXT, you can buy coverage 100% online in about 10 minutes and choose options that fit how you run your business.
