Do I Need Insurance for a Home-Based Business?

Updated on January 6th 2023

If you’re planning to start a business from the comfort of your home, you might be uncertain about what exactly needs to be done to help protect it financially. For instance, perhaps you’ve asked yourself, “Do I need insurance for a home-based business, or will my homeowner’s policy suffice?” 

The short answer is yes, you will need separate insurance, but why? Today, let’s explore the fundamentals of insuring a home-based business in more detail.

Why Won’t Regular Home Insurance Work for a Home-Based Business?

Your homeowner’s insurance will not protect your business equipment or merchandise in the event of loss, theft, or damage requiring repairs. It also won’t compensate if a cyber attack or hack jeopardizes sensitive data or your business’ finances. In addition, standard home insurance won’t kick in to cover clients who could get injured on your property. This type of policy applies only to residential environments, not a home from which you also conduct business operations. 

What if I Don’t Have Much Equipment?

If you’re a self-employed professional and your computer is the only item you need to protect to operate your business, you might not need a full-blown insurance policy. You could, however, benefit from having additional coverage added to your home or rental insurance. This will give you the added protection to cover your business property and any liability that happens on your “business premises.”  

What if I Have a More Complex Type of Home Business?

Perhaps you’re running a more complex or larger-scale operation, and you have the equipment, stock, and merchandise at home. In this case, you’ll likely need a separate insurance policy to protect all the components of your business from loss and theft. Even lawyers, accountants, and other professionals who work from home need certain coverages to protect them from risks to their business, such as privacy breaches, errors and omissions, or financial losses.  

No matter what type of business you are running from home, it’s important to talk to an insurance broker to find out exactly what type of insurance you’ll need and just how much coverage is right for you.

Factors that Influence the Type of Insurance You Need

There are a variety of factors that can lead to you requiring certain insurance solutions for your home-based business. These include the location of the property (as well as the province or territory in which it is situated), the type of business being operated from your home, your annual revenue and the specific products or services offered. There’s also the matter of whether what you do poses a higher risk in terms of damage to the property, equipment failure or improper materials storage causing a fire, and the attractiveness of your operation to thieves. 

Home-Based Business Coverage Options

To get you thinking about the type of risks you’ll need insurance for, here are some of the most common home-based business insurance coverages available:

Theft

If someone were to break into your home and steal your equipment or merchandise, your business assets would only be covered if you had a home-business insurance policy.

Personal Injury

If a client comes to your home and injures themselves on your property, your homeowner’s insurance would fall short. To avoid a serious lawsuit, you need the proper insurance that offers liability coverage for your home-based business.

Errors and Omissions

If you have errors and omissions insurance, you are covered against lawsuits associated with the advice or information you provided that could result in financial loss to a client.

Business Interruption

Water damage, a fire, or even a power outage could put your home-based business in jeopardy. With business interruption insurance, you would have all the coverage you need to pay for new equipment or a temporary office.

Types of Insurance Worth Considering for Your Home-Based Business

Depending on what’s available from the insurance provider in question, you might be able to utilize some of the following coverage options:

• Cyber liability insurance to reimburse costs associated with data recovery, hardware and software protection, potential legal and cybersecurity fees, and more.
• Equipment breakdown insurance to reimburse broken-down, faulty, or damaged equipment used for business purposes.
• Commercial property insurance for contents coverage related to your business operations.
• Insurance for general liability (covering bodily injury to visiting clients) and product liability (protecting you in the event that what you sell injures a customer or gift recipient).

Not sure if you need insurance for your home-based business? Call us today at Tanner Insurance, and we’ll show you all the coverage options for your business type and size.