Protect home businesses

From a technological standpoint, running a business from home has never been easier. Smartphones, emails, fax machines, the Internet, skyping, have all led to a major surge in what has been termed “homepreneurs.” In fact, it’s believed more than half of all U.S. businesses are based out of an owner’s home.

Unfortunately, many of these people have become entrepreneurs by necessity, having been laid off during the recent recession.

When Cynthia Jermin received a pink slip and lost her dream job at an investment bank, she left with a smile and a plan. “I had a smile on my face, because I was ready. I saw it as an opportunity to embark on this entrepreneurial journey,” said Jermin. Instead of looking for a new position, Jermin, who had been assistant vice president at Credit Suisse, decided to start a business. With financial support from her husband, she turned her guest bedroom into an office and launched Fundamental Life Products from her house in Queens.

The popular misconception is that since the business is in your home, then it must be covered by your home insurance policy, correct? But before you make this assumption, ask yourself a simple question, “What kind of insurance should I buy to protect a business: Home insurance or business insurance?” When the question is phrased like this, the answer is nearly always business insurance.

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Although there is some limited coverage for certain types of small-business activities on a home policy, most policies have several exclusions for anything business. Since the home policy is designed to protect a home, with its normal risks and exposures, the home policy needs to limit or exclude areas not normally associated with a home. So don’t assume your home insurance will protect your small-business activities.

What can solve the problem for many home-based businesses is an in-home policy, which covers a broader spectrum of contingencies, including loss of critical documents or theft of funds being taken to the bank for deposit. An in-home policy is a plan against injury or theft covering as many as three employees. Rates typically run from $250 to $500 and the plans can cover as much as $10,000 in losses.

Starting a home-based business has many potential rewards. After all, Apple, Hershey’s, Mary Kay Cosmetics, and even the Ford Motor Co., all started out of somebody’s home. But whenever there are rewards, there are usually just as many challenges. Starting up a home business is stressful enough without worrying that your homeowner’s insurance will always protect your business.

It is especially important for anyone starting a home-based business to have adequate business insurance, because even with optional business coverage, most homeowner policies fall woefully short of covering the needs of most home-based businesses. Most home-based business owners are not aware of many risks associated with their businesses, and homeowner’s policies don’t cover many of the common risks, which can include putting your personal property in peril.

If you’re doing business at home, you’re smart to have insurance. Because at the end of the day, the amount of sales you generate doesn’t matter. The amount of loss you could face should something go wrong is what really counts. •

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