3 Myths of Home-Based Businesses

July 2009
Overview: When it comes to business insurance and home-based businesses, sometimes things you think are true...turn out to be dangerous assumptions.

Myth 1: Your homeowner's insurance policy will cover most losses to your home business.

Don’t count on your current homeowner’s policy to protect your business. Most homeowner’s policies don't cover extra buildings (such as carriage houses or converted garages) frequently used for business, nor do they cover the loss of business data or injuries to clients or colleagues that occur on your premises. In addition, even if your policy does include business property in your home, it may only cover up to a few thousand dollars -- hardly enough to replace a valuable computer system should disaster strike.
 
Many insurance companies offer a specially designed rider for your homeowner’s policy that will extend it to include property, equipment and general liability coverage for your home-based business. Expect the premiums to be up to $200 or more a year.

 
Myth 2: Your existing auto insurance covers business use of your car.

If you occasionally use your personal car for business purposes, or you sometimes have clients in your car, you will probably need to extend your personal car insurance to cover business use. It’s a good idea to check your current policy to see what kind of business use is covered. If you keep valuable products in your trunk, remember that most auto insurance does not cover the contents of your car, so you will need to make sure that your product policy covers loss outside your home.
 
If employees or others use your family car for business purposes, put their names on your policy. If your employees use their car while working for you, you may need to get separate non-owned car insurance. Any vehicle that is used primarily for business will likely require a separate business-auto policy.

 
Myth 3: You’re properly covered, so you don’t have to give any more thought to insurance coverage for your business.

As your home-based business expands, so will your insurance needs. What was adequate coverage in your start-up phase could prove insufficient as the value of your business (and your equipment) increases. It’s quite possible that you will outgrow the coverage your homeowner’s policy rider or home business insurance provides.
 
Make it a habit to check with your broker about your insurance needs as your business grows. In fact, you should review your policy with your broker at least once a year. Does your policy currently meet your needs? Is all your equipment covered? Is there anything you can do to reduce your premiums?
 
Kim Krogh
Fidelity Associates