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Home-based business insurance is often overlooked. Many home-based
business owners own their own homes, and assume that their home
insurance also covers their home-based business activities.
Not only is this not true, but your home-based business activities
can void your home insurance. Home insurance covers people's homes.
Using the home for other purposes that your insurer is not aware of,
such as operating a home-based business, may invalidate your policy.
What kinds of home-based business insurance do you need? The answer
depends very much on exactly what kind of home-based business you're
operating.
While many home-based business owners rely on their home insurance
to cover damage, loss and theft of property, all home-based
businesses should have contents insurance in addition to the
contents and or property insurance provided by the owner's home
insurance. For one thing, look around your home office and make a
quick estimate of how much it would cost you to replace the
equipment surrounding you. Most homeowner's policies have a limit of
about $2000 for claims in the event of a loss. How much of your home
office equipment would you be able to replace for that amount if it
was stolen?
For another, does all the business equipment you use stay in your
home all the time? Business equipment will only be covered by your
homeowner's policy while it is on your premises. If you have a
laptop computer or a PDA that you use outside of your home, you'll
need separate contents and property insurance for it.
Another type of insurance that all home-based businesses should have
is additional general liability insurance. If your aunt is visiting
and falls and breaks her leg, your homeowner's policy will cover it;
if a client is visiting and falls and breaks her leg, it won't.
General liability insurance covers injuries to clients and employees
on your business premises and elsewhere.
Types of Business Insurance
Whether or not you need these types of home-based business insurance
depends on what kind of home-based business activities you're
engaged in.
For instance, do you use your vehicle for business purposes? If so,
you need to have your vehicle properly insured for business use to
cover any damage to your vehicle and to cover your liability to
others if you're involved in an accident.
Does your home-based business involve selling a product? Then you
should consider getting product liability insurance to protect your
business from liability resulting from the product's nonperformance.
Does your home-based businesses provide services? If so, you will
definitely want some kind of liability insurance. Professional
liability insurance protects both you and your clients.
If a client claims to have suffered damages through your actions as
a professional, your professional liability insurance will shield
your personal assets and pay for your defense against such a claim.
Such coverage also ensures that a client who has suffered damages
will be adequately compensated.
There are many different types of professional liability insurance
that home-based business owners may need. Malpractice insurance
protects you from damages caused by a treatment that goes wrong.
While we immediately tend to think of professionals who provide
medical and health-related services such as doctors, dentists, and
physiotherapists, when we think of malpractice insurance, there are
actually many other home-based practitioners who may need such
insurance, ranging from hairdressers through dog groomers.
If your home-based business involves being paid to give professional
advice, you need errors and omissions insurance. If a client claims
that he or she has suffered damages because your advice was
inadequate or incomplete or because of a negligent act on your part,
error and omissions insurance will cover your defense and the
damages awarded to the client if the case goes against you.
And if your home-based business involves providing services at
client sites, you may need completed operations coverage to protect
you from liability that could arise after you have left a client's
premises, when your client starts to use whatever you were working
on and injury or damage occurs. I also strongly urge all home-based
business owners who depend upon their business as a source of income
to consider buying disability insurance, which will cover your lost
income if you're disabled and unable to carry on your business.
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