You may be familiar enough with insurance to recognize your risks and liabilities as a homebased business owner, but are you adequately covered for all that's at risk? Many homebased entrepreneurs mistakenly think they are, only to discover when a disaster strikes that their policy doesn't cover everything. "Anybody operating a business out of their home should not rely on their homeowner's [or renter's] policy to protect them from the exposures that they have through the business--[there is] typically an exclusion of some sort with regard to business operations," notes David Golden, director of commercial lines for the National Association of Independent Insurers in Des Plaines, Illinois.
Exclusions include liability and coverage of business equipment. Golden suggests additional coverage on Internet-specific exposures so you're covered in case the next virus takes down your business for a few days. It'll also protect you on the liability side in case clients affected by your downtime decide to take you to court.
Covering your assets is imperative to help you recover from the unexpected, but are you covering your most important asset--yourself? Even if you have life insurance, what happens if you become temporarily or permanently disabled? Don't think it can't happen to you. Take Rosemarie Rossetti, who left her job as a professor at Ohio State University in 1997 to start her own publishing and consulting business, Rossetti Enterprises Inc. June 13, 1998, changed her life forever: A tree crashed down on her during an afternoon bicycle ride, knocking her unconscious and costing her the use of her legs. It also cost Rossetti her business, which had to be dissolved while she underwent intense physical rehabilitation.
Fortunately, prior to the accident, Rossetti had researched disability income insurance and found that she was already covered by the State Teacher's Retirement fund, which continued to cover her following her accident. The income she receives from the insurance has helped her get back into business. She is now a motivational speaker and has also begun a program to encourage insurance agents to sell disability income insurance by positioning herself as a living case study of the risks of not having this type of insurance. "They oftentimes get resistance when they approach a client, and it's my premise to talk to the client, helping them to understand it's an investment," says Rossetti. "Here it is three and a half years later, and I'm still trying to be financially successful."
"People seem to underestimate their risk of disability and overestimate the protections that may be there for them if they do have a disability," concurs Winthrop S. Cashdollar, director of the Center for Disability & Long-Term Care Insurance for the Health Insurance Association of America in Washington, DC. According to Cashdollar, variables for premiums on disability insurance depend on the income to be replaced (disability insurance covers 60 to 67 percent), the duration of coverage (one year, until age 65, etc.) and when the coverage starts (90 days to six months) as well as what triggers the coverage.
Your best defense is to prepare for the unexpected, whether it's a natural disaster or a personal injury. When choosing insurance, consider the following:
- You can add an endorsement onto your homeowner's policy. Buy an in-home business policy that includes general liability coverage and may offer business interruption coverage, or purchase a business owner's package policy, which offers similar coverage as an in-home policy but on a broader scale.
- Consider professional liability insurance to protect yourself against lawsuits.
- If you have employees, get worker's compensation coverage.
- Business interruption insurance compensates for lost income due to a catastrophe and will pay to set up temporary accommodations until you can return to your original location.
- Your auto insurance should cover business- related trips. You'll need separate policies for yourself and any employees.
It might cost more to cover yourself from every angle, but think of the costs involved with lacking coverage in the event of a catastrophe. Isn't the cost of insurance worth it?