Home-based businesses still make up a big proportion of the world economy. It is easy to start up a small business in our home and for many people that can be an inviting temptation. In essence, our home can be a ready-to-use office, if we have a room to spare. There are many benefits of having home-based businesses, but there are a number of complications that we need to consider. Many owners of home-based businesses think that their homeowner’s policy protection is good enough. However, we should know that this kind of insurance policy isn’t nearly enough to provide us with proper protection. As an example, there are liability factors that we need to consider. If an employee or customer fell and hurt inside our property; we should be covered financially against that.
There are different types of home-based businesses that we could use. BOP (Business Owner’s Policy) is a type of business insurance that’s common among many small and middle-sized business owners. Often, BOP could provide us with proper coverage for many risks. However, it is often said that BOP alone isn’t enough and it should contain any of these components, depending on our requirements:
- General liability: When we purchase a BOP, it should contain general liability coverage. Customers or suppliers could occasionally arrive at our home to perform specific business tasks. During an unfortunate incident when someone gets hurt, the general liability insurance should provide us with the proper coverage.
- Business interruption: Our business could be occasionally interrupted by different reasons. As an example, fire may not burn down our house, but it could engulf a part of our office section, disrupting the entire operations for a week. The insurance company could provide us with coverage, not only for repairing damages; but compensating us for the loss of revenue due to the interrupted business operations.
- Worker’s compensation: This component is imperative if we hire someone in our house. It should allow us to cover medical expenses that could be needed when the employee is injured in our home. The employee will still receive salary during the recovery period.
- Professional liability insurance: It is a different component compared to the general liability insurance. It should provide us with coverage when any claim is made by clients due to failure or neglect on our part. If our service or job that we provided wasn’t up to par, customers could make claims against us. This component is also called errors and omissions.
- Umbrella liability: This component provides coverage after we have reached the limit of our existing liability insurance. It should work as extra insurance protection for additional security.
The small business insurance should be a separate protection from the existing homeowner’s insurance. There are other alternatives that we can choose, such as home business policy. At the beginning of our home business, we may start with barebones insurance protection. We could upgrade the protection later when necessary.