Homepreneurs: Beware This Common Home-based Business Mistake!


The U.S. Small Business Administration reports that there are 29.6 million small businesses in the U.S. of which 52% are home-based — and this trend is only expected to increase, according to Network Solutions Small Business Index research. We even have a new word for this vital rising demographic: “homepreneurs” — but some home-based small business owners make the dangerous assumption that their homeowners insurance will cover their business needs. In fact, it’s critical to consult with your insurance rep to understand the limits of your homeowner’s insurance in regard to your home business.

For example, many homeowners policies provide a maximum of $2,500 coverage for business equipment (computers, fax machines, etc.) in the home — while your actual investment may far exceed this figure, so you may need business property insurance to adequately cover equipment and any inventory. Additionally, depending on the nature of your business, you may require liability insurance: “If you are sued because of your home-based business activities — the company that hired you as a consultant believes your advice was dead wrong; the computer equipment you “fixed” doesn’t work; the cookies you baked made someone ill — your homeowners policy won’t protect you.”

Finally, you may want to insure against loss of income in the case of fire or natural disaster.

If you are like millions of other home entrepreneurs, your business is too important to risk with sup-optimal coverage; here are some items to consider when consulting with your agent:

  • Equipment and furniture
  • Inventory
  • Business items belonging to others in your care
  • Accounts receivable
  • Important records, documents and reference material
  • Electronic data
  • Liability for personal injury, products, services and contractual obligations.
  • Auto — be sure your existing policy covers all business uses

And you may have special considerations for disability, life, and health insurance. Your agent can help tailor your coverage to your specific needs, and protect your important home business. See also, our Small Business Insurance Tool Kit.

Thinking of starting a business? Here’s a Small Business Insurance Tool Kit

As you plan for a new business, are you confident that you know enough about your insurance needs? Test your business insurance IQ with a quiz prepared by the National Association of Insurance Commissioners (NAIC) to see how you fare.
If you’re currently in the planning stages for launching a new or home-based business, an important aspect of the business plan is factoring in insurance costs. An independent insurance agent should be part of your planning and advisory team. But meanwhile as you do your planning, there are a lot of good online resources where you can learn some of the business insurance basics.
NAIC offers Insure U for Small Business. The site is a great primer on business insurance, offering helpful information, tips and considerations about for owners of small companies and home-based businesses.
Here are links to the major groupings that the site covers.

The Insurance Information Institute is also an authoritative and non-biased source of information on general business insurance as well as a helpful glossary of insurance terms. Here are a few other essential tools they offer for a small business: