Since the start of the pandemic, millions of Americans have opened home-based businesses. In the rush to get a business up and running as quickly as possible, some tasks get pushed to the back burner. For example, does the work you’re doing from home really need home-based business insurance?

For many home business owners, the answer to that question is a resounding yes. Unfortunately, they often don’t learn that until they’re in a situation that requires it—and by then it’s usually too late. If you’re starting a business and want to explore insurance options that may help protect you and your business assets, you’ve come to the right place. Read on for a comprehensive overview of the home-based business insurance policies you’ll want to consider.

General liability insurance in a nutshell

General liability insurance protects small businesses from legal claims related to bodily injury, property damage, and libel or advertising injuries. Depending on the type of business you’re running, this may seem incredibly important or completely irrelevant—maybe you don’t work with clients face to face, so you don’t think this would apply to you. But general liability insurance also protects you against seemingly innocuous occurrences on your property that could now become a lawsuit because your home is a business.

Take a close look at the work you do and consider how general liability could help keep you safe—legal bills add up quickly and could potentially cost you your business.

What is home-based business insurance?

If you’re running a business out of your home, having the right insurance coverage to protect your assets over the long term is essential. The gray area that gets many new entrepreneurs into trouble is the fact that, despite your home and work space being one and the same, all the coverage your business may require is not included in your homeowners insurance.

For example, homeowners insurance will cover some expenses for damage to your home, theft, or other incidents that may take place, but without commercial property insurance, you won’t have sufficiently comprehensive coverage concerning your business supplies, products, or spaces.

Having general liability insurance will provide a more complete layer of protection against the types of claims a home business owner may face in their work. For example, if an individual unaffiliated with your business is on your premises for any professional reason—meeting to discuss a collaboration or contract, delivering materials related to your work, or picking up orders for delivery, for example—and they slip and fall or are otherwise physically injured, having general liability insurance can be an asset.

If you would like to save money while increasing the full scope of legal protection for your home-based business, bundling your insurance is a great option. Many insurance providers offer what is called a business owner’s policy, or BOP. This type of policy is a financially frugal way for home-based business owners to obtain both general liability coverage and commercial property insurance at the same time without having to pay two separate bills at full price. The coverage would include business property, customer property, and any injuries that occur on your premises.

The benefits of insuring your home business

As mentioned above, there are many benefits to getting extended home-based business insurance coverage. But if you already have home insurance, is it really necessary?

The reality is, when a crisis strikes, homeowners insurance generally isn’t enough to cover the expenses of replacing, repairing, or rectifying the claims a home-based business may come up against.

Let’s break it down: a homeowners insurance policy typically only covers $2,500 in business property, at most. Additionally, if you operate your business out of a detached garage or shed, you likely wouldn’t get any support in the event that something happened to it. You would have to cover costs yourself if your home insurance policy excludes “other structures” from your coverage, since these aren’t attached to the home.

That means home-based business owners are forced to cover the majority of these expenses out of pocket, using precious resources that were likely already allotted to another line item in the budget to pay legal fees. No one wants to add another regularly occurring expense to their business. But with the knowledge that this relatively small monthly cost—just $45 on average, or even less for smaller operations—could save your business in the event of a disaster or incident, it’s a cost most business owners choose to take on.

How to get liability insurance for your home business

Once you’ve decided you want to get extended home-based business insurance, you’ll need to decide which specific policy you want to buy. You already know that by enrolling in this additional insurance, your company will receive coverage for legal defense and settlements, as well as any costs associated with judgments. But how do you actually get liability insurance?

1. Prepare your documentation

Before you start the process of getting business insurance, make sure all the documents you’ll need to enroll are in order. Most insurance companies will need the following information:

  • Documentation showing how long you’ve owned your business
  • Your business’ estimated revenue for the next year
  • Detailed information on what your business does
  • Your business location and proof of ownership or lease
  • How many people you employ

2. Consult with an expert

General liability insurance can be tailored to best suit the exact work you do within your business by providing specialized coverage. For example, this might mean incorporating protection for errors or omissions insurance if you work to prepare taxes for your clients. In order to decide exactly what policy is right for your business and identify any coverage customizations you may want, finding a commercial insurance agent you trust is a great option.

Discuss your business thoroughly with your insurance agent to get expert insight into all the areas in which your business may be vulnerable to legal action and get the protection you need. Because commercial insurance agents don’t work with an individual insurance company, they’re able to prioritize your needs above any particular company’s and help you identify the policy that will best cover your assets and interests.

3. Evaluate and enroll

Once you know exactly what coverage you need, identify providers you may want to work with and request a quote. Ask the insurance company and your commercial insurance agent any questions you have to make sure you are making the best decision for your business. Once you identify the right policy for you, your agent will help guide you through the process—they receive a commission for their work from the insurance company they sign you up with.

Thinking beyond insurance

While choosing to enroll in home-based business insurance can be daunting, know that the small monthly payment is protecting you financially in the long run. If you’re looking for additional support in getting your business off the ground, consider opening an account with NorthOne. Our accounts are tailored to entrepreneurs like you. If you’re looking for small business banking experts, visit us online and contact us with any questions you have.

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