Starting a home-based business? Make sure to let your insurance company know

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Don’t assume that homeowners insurance will cover your business.

Main points

• Many people are working remotely or want to start a home-based business.
• Business activity may influence the type(s) of insurance required.
• Homeowners must notify their insurers that they are operating a business from home.

Nowadays, many people want to work from home – especially since the new variants of the Covid-19 virus are always emerging.

But whether a person is working for an employer in the home or starting their own business outside the home, it’s important to alert their homeowner’s insurer when their property is being used for business purposes.

This is why it is important to call your insurance company when you are running a home business.

Anyone who starts a home-based business or stores a lot of business property in their home should notify their insurers for one simple reason. A standard homeowners insurance policy may provide little or no coverage for commercial properties. And a standard policy may not provide liability coverage when a property is used for business purposes.

This means that a homeowner starting a home-based business is not protected if a customer visits, falls, is injured, and sues. This means that if valuable business assets are destroyed, the owner gets a portion of the money needed to replace them – if they have any coverage.

Homeowners insurance does not cover any loss of income if the business is temporarily shut down due to damage to the home.

This is a big risk to take, and most people can’t take the chance of paying out of pocket to replace all of their company’s assets or to cover legal fees and damages if damage occurs.

How to make sure you have the right insurance coverage

There are a variety of ways that people who run a home-based business can get the proper coverage — but it all starts with approaching an insurer for options.

The insurance company can explain the limitations of the current coverage, so the property owner can make a realistic assessment of what additional protections should be taken. Many insurers offer a rider or endorsement on a home business policy. This includes coverage for additional business assets, loss of income if the business is damaged and operations cease, and liability for damages incurred in the course of business operations.

Some business owners may need a special business owners policy that goes beyond this type of additional protection. This is especially true if there is a serious risk of injury, if there are vulnerable employees, if the business is very profitable, or if there is a lot of expensive business equipment.

But without contacting their insurer, many people may not know what coverage home-based businesses need. When something goes wrong, they may be in for a very unpleasant surprise when it turns out that they are not protected. This should be avoided at all costs, especially if it’s needed to show simple phone call options and achieve overall protection.