Legal 101

Insurance

As a homebased business owner, two types of insurance cry out for your checkbook: liability and property damage. Liability protects you against someone getting injured on your premises or by one of your products. Property damage protects against damage to a host of things, from computers to carpets.

Let's start with the most inclusive type of insurance and work our way down:

A business owner's policy (BOP) includes both liability and property damage coverage. Typical hazards covered include loss of data, software or income; theft; and general business liability. The structure housing your business is also covered, so this might duplicate your homeowners' coverage. A BOP also provides some off-premises coverage, including liability coverage for products you sell or parts you install. Things like flood protection or insurance for outdoor signs may be optional.

A home office policy is a step down from a BOP. This policy combines homeowners and business insurance, eliminating duplicate coverage or gaps. This is a good choice for a company with no more than a handful of business visitors each week and quality computer equipment. It covers general business liability, lost income and ongoing expenses like payroll for up to one year if the business can't operate because of damage to your home. Also covered are loss of records, accounts receivable, some off-site business property, fire, theft and personal liability. Many policies don't cover "options" such as floods or earthquakes.

A "business pursuits" endorsement to your homeowner's policy provides the least protection, and isn't recommended for most homebased businesses that have customers on site or costly equipment.

Examine your business and your assets to determine your net worth, likelihood of business interruption, and liability "red flags." When you've found a policy that's within your budget and covers possible losses, review it yearly to make sure it's still adequate.

One final note: If your business has employees, you need workers' compensation insurance, which covers employees' injuries on the job. Requirements vary from state to state-check with your state's employment office to see what's required.


AdditionalResources

Insure.com: This is a good general source for any business insurance question you may have.

Quicken Insurance: You can find information, get quotes, connect with agents and buy policies on this site

If You're Clueless About Insurance and Want To Know More by Seth Godin

The Complete Book of Insurance by Ben G. Baldwin

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