Insurance Needs for Your Home Business

Proper insurance is a must if you operate a business out of your home, regardless of where you live. Although cities like Chicago don't have specific insurance requirements for businesses in the city, the state and federal governments do. There are a few policies that should be considered by home business owners.

Property: Policies for Home and Property

Your home should already be protected by homeowner's or renter's insurance, but this may only provide limited coverage if you are operating a home-based business.

A home policy will have limited coverage for any business on your property, and it may not cover anything if the business is in a separate building from your home. It doesn't matter if the building is on your home's property, it will need separate coverage. Another risk is that if the business causes damage to your home, such as if equipment starts a fire, it may not be covered under the policy.

Business Endorsement

The simplest way to cover any business property at your home is to add a business endorsement to your existing home insurance policy. This endorsement is designed to add additional coverage so that you can get full reimbursement for both business and home losses. The endorsement may also be needed to ensure that any losses to the property due to the business will be covered. 

Business Property Policy

Depending on the type of business and the liability coverage needed, it may make more sense to maintain separate homeowner's and business insurance policies. Such a policy may also be the only option if you operate your business in a building detached from your main residence. For home businesses, the business policy usually takes over any expenses that are not paid out by the home policy.

Clients: Policies for Business Liability

For businesses where your clients come to your home, such as for consultations or in-home services, it's necessary to protect yourself from liability. If someone slips and falls on your property and you are found liable, it can be a very expensive problem.

Further, your home policy may only offer insufficient liability protection for business activities that take place on your property. This can put you at risk of losing both your home and business in the event of a lawsuit.

Liability Coverage

A good business liability policy will cover any legal fees in the event of a liability lawsuit, along with covering the cost of any settlements that may result. Your policy should cover both injuries on the property, such as a fall, as well as any liability that could be incurred if you are sued for one of your products or services. The amount of coverage needed depends on your home policy and your business type.

Specialty Liability

Some industries have specific liability coverage needs. For example, those in medical industries may require malpractice insurance, or a tax professional may need errors and omissions coverage. Your insurance agent can let you know if your business has specific needs.

Employees: Policies to Protect You and Your Staff 

Whether you staff works in your home or offsite, you will be required to provide some insurance. For example, the State of Illinois requires worker's compensation coverage for nearly all businesses that are operating within the state.

Employee-based insurance is designed to protect the business owner from legal and medical costs, while also ensuring that the employee gets the medical care and financial compensation they deserve.

Worker's Compensation

If you have an employee other than yourself, then you likely need a worker's compensation policy that meets state minimum requirements. For business in certain high injury risk and hazardous industries, you may also need a policy even if you are the only employee. 

Vehicle Coverage

A sometimes overlooked insurance requirement is vehicle coverage. Any business use of a vehicle, especially if it's your vehicle and an employee is driving, needs to have a business auto insurance policy covering it. Your personal auto policy may not provide any coverage if the vehicle is being used for business purposes.

Business: Polices to Guard Your Business

Many business owners take the time to properly ensure their home, equipment, and staff, but they may overlook the less common policies that can save a lot of heartache down the road. 

Income Loss Coverage

Unlike a large corporation, most small home businesses are highly dependent on the owner. If you suffer an illness, injury, or other situation that makes your business unable to operate for some time, you risk losing everything as there is likely no income if you can't work. This coverage ensures you have some money coming in. Income loss can even cover you in the event your business is temporarily unusable, such as following a natural disaster or fire.

Equipment Policy

For many business, any equipment will be covered under the general homeowners or business liability policy. There are exceptions, though, if you have expensive or highly specialized equipment. In this case, consider adding umbrella coverage to your current liability policy, or purchase a separate equipment policy.

Contact Illinois Insurance Center Inc to learn more about the policy requirements for your home-based business.