If you're starting a business from home, don't assume your homeowners (or renters) coverage is sufficient to cover any mishaps you might have. Properly insuring your homebased business is crucial to protecting both your business and your home.
Beth Parquette, president of Parquette-Clement Insurance Services, an insurance agency in North Port, Florida, says, "A homebased business needs all the same insurance [as] a retail space, a warehouse or any place of business." While most homeowners policies cover a limited amount of business equipment, she says, it's likely that what you have is worth more than your policy's limits.
So what kind of coverage do you need? Parquette says to make sure the following are covered:
- Equipment: This includes everything you use to operate your business (computers, copiers, printers, telephones, etc.) plus other equipment used to provide products and services.
- Inventory: This includes the products you sell and, if you do any of the manufacturing, the materials used to make them.
- Vehicles: Any vehicle used for business purposes must be insured, even if it's personally owned. ncustomer property: If you take possession of your customers' property for any reason, it should be insured while in your custody.
- Fidelity bond: If you (or your employees) perform work in customers' homes, a third-party fidelity bond will pay for losses due to fraudulent acts such as theft.
- Workers' compensation: If you have employees, you need the appropriate coverage as required by your state.
- Liability: Base your liability coverage on your potential risks. Consider whether you need professional liability; errors and omissions coverage; liquor liability (for event planners, caterers, etc.); off-premises liability (for working at another location); or product/completed operations coverage (for your product/work after it's done).
Choose an agent who understands your type of business and has access to a variety of homebased-business insurance products. Make this process a startup priority. Parquette warns, "If your carrier doesn't know you have a homebased business, in the event of a claim, there's a good chance your homeowners policy could be canceled."