If you own a home based business you may find your Homeowners insurance falls short in terms of coverage. Home businesses are substantial in number. Statistics I have seen put the number in the millions and the sales in the billions.
Homeowners insurance was not designed to cover business exposures. In fact there are exclusions and limitations in the homeowners policy. Many policies consider a business a trade, profession or occupation engaged in on a part time, full time or occasional basis. There are also compensation amounts that may be as low as $2,000 that further refine the definition. The definition of business may vary depending on the carrier that writes your insurance but suffice it to say very few activities will fit through the definition to obtain coverage.
Once an activity is defined as a business your homeowners policy will have very little liability and property coverage to offer. Business property may be limited to $2500 while in your home and $500 while off premise. Again, these amounts may vary depending on which company you have chosen for coverage. Liability arising from the business will be excluded. Riders or endorsements can be attached to the home policy to work around the business definition but they should be explored carefully to be sure they fit your situation. If your business is a significant percentage of your income your home policy will offer no way to cover a loss of business income in the event of a loss at your home.
A better way to handle the exposure is to purchase a policy specifically designed for home based businesses. Some inusrance companies can even endorse a rider onto an existing home policy to cover the exposures. These home business policies are structured very much like a traditional commercial policy and often times have the advantage of lower minium premium levels than the commercial market. These policies can have additional insureds added if required by contract and offer higher limits of liability. Policies usually are underwritten based on the type of business. If your business fits into one of the underwriting categories the pricing can be done quickly. If for some reason your business is not an acceptable category then you may have to purchase a traditional commercial policy.
Insurance for home based businesses may be less expensive and easier to obtain than you think. Reliance on your homeowners policy to cover your exposures as a businessperson may not be the most practical way to go.