By ALLEN MCQUISTONThe Jemez Agency
I was talking with a client recently about how well her business was doing selling widgets on Amazon. She gets an order, boxes it up and sends it on its way. Simple. Until I had to deliver some news she was unaware of.
If her inventory catches fire in the garage, forget about it. Unless you have home insurance that specifically covers your home-based business, you’re on your own.
If you run a small business from your spare bedroom, chances are your homeowners insurance policy won’t cover a claim if your customer comes to your home to pick up some paperwork and slips and falls on your icy front stoop.
Maybe worst of all, if you give advice in your business and you make a mistake that costs a client money, the lawsuit that could result will mean money out of your pocket to settle it or defend against it — unless you carry errors and omissions insurance that specifically covers your situation.
“If an individual is running a business out of their home, they can’t rely on a homeowners policy to provide coverage,” says Jeff Olmstead, assistant vice president for small commercial underwriting at The Hartford insurance company.
According to a survey conducted for the Independent Insurance Agents & Brokers of America, 40 percent of people who work from home thought — incorrectly — that their homeowners insurance or the insurance provided by their employers would provide coverage if they needed it.
“The typical homeowners insurance policy provides zero coverage for business-related claims,” says Bill Wilson, associate vice president for education and research for the IIABA.
So what do you do?
Endorse your homeowners insurance. Some insurers offer an inexpensive business endorsement. It can cost as little as $25 to $50 per year and covers, perhaps, $2,500 worth of business property. These endorsements rarely offer any general liability or professional liability insurance. They can be appropriate for someone who works at home for another employer.
Business owners policy. A business owners policy, known in the industry as a BOP, covers business personal property and inventory, general business liability and limited off-premises business property. It will compensate you for loss of income for up to a year if fire or robbery prevents business as usual. If you have customers coming to your place of business, they’ll be protected from accidents while on the premises. A BOP doesn’t include workers’ compensation insurance, which covers employee accidents on the job. The price of a BOP policy varies based on the nature of the business and its location.
For most home-based businesses, I believe a BOP is the right choice. But if you in the professional services industry, like an accountant or physical therapist, you are also going to need professional liability insurance.
To make sure you and your business are properly protected, talk to your insurance professional.