You need insurance for your business--period.
There are so few homebased businesses that do not require some sort of business insurance that you should simply assume you need it. Why? Because if you are a sole proprietorship or partnership, you can be personally sued for business actions. If you are a corporation, your entire operation can become extinct--and your shareholders very upset--should a lawsuit or other problem call for huge sums of money that the corporation cannot produce.
Excerpted from Starting a Home-based Business