What kind of insurance is needed for a home-based business?

Insuring a home-based business

Home-based businesses need protection, too, although usually on a different scale than other types of businesses. Homeowner’s insurance is not designed to address the needs of a business, including equipment costs or coverage for things like lost income inventory. So it’s often not adequate to cover potential losses caused by operating a business out of a home. That’s where business insurance comes in.

The business insurance essentials are the same for a home-based business as for larger businesses. But the type and amount of coverage is different, depending on the type of business.

There are three basic options for insuring a home-based business. For some businesses, an incidental business endorsement added to an existing homeowners policy can be adequate. Other businesses may require an in-home business policy. And others may find that a Businessowners Policy (BOP), a package of property and liability insurance, is the best option.

A business endorsement simply adds additional coverage to an existing homeowners policy. This is usually only sufficient coverage for very small businesses, with very limited income from the business.

An in-home business insurance policy is a policy created specifically for a home-based business. This type of coverage typically is the same as larger commercial policies, but with lower premiums and lower limits of coverage.

A Businessowners Policy is often a good choice for a home-based business, as well, as the package includes all the types of coverage necessary. As with an in-home business policy, BOPs for a home-based business will likely have lower premiums and coverage limits than for other, larger types of businesses.