Whether it’s your side hustle or your main gig, home-based businesses can often simplify life and improve your income and work-life balance. About 50% of businesses are home-based, according to the Small Business Administration. Your homeowners insurance isn’t designed to cover business needs, which is why it’s essential to buy home-based business insurance.
Learn more about business insurance and how it works.
What is a Home-Based Business?
A home-based business is a business that you run from your primary residence. Your home might serve as a temporary location while you get your business up and running or it might be the permanent home of your new business.
Your home-based business can be anything from a bakery and catering service to freelance writing to accounting, counseling and more. Businesses that impact the neighborhood, like busy auto mechanic shops, may not be allowed depending on the zoning in your local area. If you’re unsure of whether you can operate your business from home, consult your local government or a business attorney.
Best Home-Based Business Insurance
Which home-based business insurance is the best? Here are Benzinga’s top picks.
Try Simply Business
Simply Business offers a comprehensive suite of business insurance that specializes in making it easy to insure your business. Whether you’re looking for construction workers' insurance or insurance for your startup, Simply Business helps you find the right workers’ comp coverage at the right price. This includes any business that you can start and run out of your home, irrespective of how many employees you have.
Tell Simply Business a little bit about your business and you'll get almost-instantaneous affordable quotes from top insurance providers to protect your business and safeguard employees if they’re hurt on the job. You can also look into business owner’s plans, liability insurance, commercial auto and more that will cover everyone on your team, and you can get covered in accordance with state law without overspending.
Building your business is hard enough. Let Simply Business make it easier. Get a quote from Simply Business today.
What Does Business Insurance Typically Cover?
Business insurance covers a wide range of needs. Depending on the policies you purchase, it can protect your business property, including computers and printers, inventory and other equipment. It can also protect you if you’re sued over a client injury or damage to a client’s property.
You can also purchase coverage that protects you if you’re sued due to professional negligence. If you use your vehicle for business purposes, you can buy a policy that protects you.
Benefits of Home-Based Business Insurance
The benefit of home-based business insurance is that it protects your assets and the business you’ve built. A lawsuit can be devastating to any business, but especially a small one. Liability coverage helps pay for your legal defense costs and any awards or settlements. Property coverage helps ensure that you can rebuild if a worst-case scenario occurs.
While it might seem like business insurance is just another expense, it’s worthwhile to have the protection you need. It provides security and peace of mind, and you can tailor your coverage to fit into your budget.
What Kind of Insurance Do I Need for My Home-Based Business?
The type of insurance you need for your home-based business depends on the type of business you have. The best insurance for food businesses will be different than the best insurance for accountants. The insurance you need depends on whether you keep inventory, have employees, use your vehicle for business and more.
Here are several types of business insurance to consider:
Business Property Insurance
This insurance helps you recover if your business property is damaged or destroyed. It typically covers losses due to theft, fire, lightning, smoke, vandalism and more. Damage from floods and earthquakes may not be covered, so if these are areas of concern, you may need to purchase separate policies to cover these perils.
General Liability Insurance
Liability insurance protects you if a customer sues you due to bodily harm or property damage. For example, if a client trips while walking through your home to get to your office, they could sue. Or they could sue if you do work in their home and accidentally damage their property. Liability insurance helps to pay for your legal defense costs and the costs of any awards or settlements.
Business Owners Policy (BOP)
One of the best small business insurance options is a business owners policy. This policy combines property insurance, liability insurance and business interruption insurance into one policy. Business interruption insurance helps to pay for your business costs if you’re unable to operate due to a covered event. Buying these policies together is usually less expensive than buying them separately.
Business Auto Insurance
You may need business auto insurance if you have a vehicle that’s primarily used for business, like a catering van or a pickup truck for a home repair business. Business auto policies are similar to personal auto policies in that you can tailor your coverage. You can choose a policy that just meets your state’s minimum requirements or you can choose one with more extensive coverage.
State minimum coverage typically includes liability insurance, which helps pay for bodily injuries and property damage to other parties if you or an employee is in an at-fault accident. Some states also require you to have uninsured/underinsured motorist coverage, which helps cover costs if you’re involved in an accident with an uninsured driver or one who doesn’t have enough insurance.
Your state may also require personal injury protection. This helps pay for the medical expenses of you and any passengers.
You may also want optional coverage. Collision coverage pays for damage to your vehicle if you’re involved in an at-fault or single-vehicle accident. Comprehensive coverage helps pay for damage that’s not related to an accident, including theft, fires and vandalism.
An insurance agent can help you determine whether you need business auto insurance and what coverage would be the best fit.
Professional Liability Insurance
While you strive to always give accurate advice, sometimes things go wrong. Professionals who give advice, design things or give recommendations should consider professional liability insurance.
This coverage helps cover your costs if you’re sued due to professional negligence. It helps to cover your legal defense fees and any settlements or awards.
Workers’ Compensation Insurance
In every state except Texas, you need workers’ compensation insurance if you have one or more employees. This coverage pays for medical care for your employees if they have a work-related injury or illness. It also helps make up for their lost wages if they need time off and it may help with rehabilitation if they’re unable to return to their previous job.
Umbrella Insurance
Most business insurance policies, including business property, general liability and BOPs, have policy limits. If a claim exceeds those policy limits, you’re responsible for the costs unless you have umbrella insurance.
Umbrella insurance starts paying when your policy reaches its limits and pays until its limits are exhausted. It may also offer coverage not provided by your other insurance. For example, it might cover your deductibles.
Cost of Home-Based Business Insurance
The cost of home-based business insurance depends on several factors, including:
- Where you live
- The type of business you have
- The number of employees you have (if any)
- The size of your payroll
- Your claims history
Here are the average costs of several types of home-based business insurance.
| Policy | Annual Premium | Coverage Limit |
|---|---|---|
| General Liability Insurance | $350 | $2 million |
| Commercial Property Insurance | $755 | $60,000 |
| Business Owners Policy | $400-$2,500 | $1 million per occurrence/$2 million per policy term |
| Workers’ Compensation | $560 | n/a |
| Commercial Auto Insurance | $1,700 | $1 million |
| Commercial Umbrella | $500-$1,500 | $1 million |
Home Insurance vs. Home-Based Business Insurance
Home insurance is designed to protect your home as a residence. It covers the physical structure of your home and your personal belongings. It’s not designed to protect business needs. For example, it may have limited coverage when it comes to your business inventory and equipment, including computers. It wouldn’t provide any protection when it comes to business-related liability issues.
If your business is very small, you may be able to add an endorsement to your homeowners insurance policy to cover your business needs. For most businesses, buying a business policy may make more sense. An experienced insurance agent or broker can help you decide which option is the best fit for you.
Do You Need Home-Based Business Insurance?
If you keep inventory in your home, have specialized equipment, have clients in your home or have employees, you should have home-based business insurance. To find the right coverage for you, contact multiple insurance providers.
Keep in mind that a lot of factors influence your insurance costs. For example, the best business insurance in California will have different costs than the same insurance purchased in Ohio. Ask potential insurance companies about discounts and other options for lowering your insurance costs.
While insurance might seem expensive, the peace of mind is well worth the investment.
