Insurance Matters To A Home Office
If you're someone who runs a home business from your home, then you already know that maintaining good insurance coverage is one of the most important things to do. But, there are many other benefits to having good insurance coverage as a small business owner with a home office.
In this article, we'll be discussing what types of coverage you should have to ensure that your business is covered for any scenarios. We'll also look at what types of businesses might need additional liability or personal property coverage and why. You don't want to be in the position where you've taken out some coverage and then are later told that it doesn't apply...
As mentioned earlier, one of the reasons many home office owners choose to work from home is that they already have a lot of protection in their home.
Think about how you would feel if your house burned down or was damaged in a big storm? You'd be freaking out (maybe to the point where you wouldn't be able to sleep at night). And what if something happened to your vehicle? Just as with your house, most people would go absolutely nuts. I know that I would. And so would my insurance company, which is why I carry full comprehensive and commercial auto insurance with my auto coverage. (While there are other types of coverage for cars, we'll be focusing on homeowner's insurance here. It's also important to note that each state has different auto insurance requirements and laws that may or may not apply to your situation.)
Other things to consider for home office owners are the contents in the office. You might have some personal papers and documents that you'd want to protect. You'll want to make sure they're fully covered with your home insurance policy.
Like I said in the opening, home insurance for a small business is about ensuring peace of mind (even if you never have to use it). So for us, our main focus is on full comprehensive and commercial auto insurance.
We also have enough of a claim history that we've actually asked for full replacement costs. We maintain our own vehicles and can keep a detailed log of all repairs and maintenance. So it wasn't hard to convince the insurance company that we needed full replacement costs to be covered (and not just a set price). Some agents have told us this is rare, but I think they just didn't know about how much extra coverage we had already taken out.
I'm not going to go into all the different types of coverage you should have, but we'll cover some of them here and talk about why certain types might be important for your business.
Before I get into that though, I'm going to mention how important it is for you to have a good agent and company. Both of these are equally important since they're the ones who will be there to help you with any claims and questions. You can't just sign up with any company and then hope for the best when it comes time to file a claim or get something fixed or replaced. You need an agent who knows what they're doing and that you can trust.
I say "and" rather than "or" because, in my opinion, you should have an independent agent since they have no loyalty to any company (which is why they're able to offer you different companies' coverage). If a company goes out of business, then you'll want your agent to be able to offer you replacement coverage.
Other types of coverage that might be needed by a small business owner with an office in their home are:
- Business interruption: This can be used if you're forced to close your business for an extended period due to something like a fire or some other type of damage. This is different from commercial general liability (we'll cover that next) in that it covers the money you would have made while not being able to conduct business. The amount paid would be based on the amount you would have made in a full 12-month period.
- Property insurance: This covers your office building and any other structures on your property. It's important to note that you'll need a separate policy for vehicles since it only covers physical damage to the structure and not the vehicle itself. Because of this, we've also looked at liability coverage as well (which is separate from property insurance). And some agents will recommend that you consider additional protection for computers, phones and other electronic equipment since they could get damaged in a fire or other type of disaster (just as with documents).
- Commercial general liability: This insurance covers the company and things such as employees. The policy would cover bodily injury and property damage liability for anyone working for you or any other company in your name. You'll want to make sure that this covers the types of things you'd need, such as medical and dental expenses for an employee. And since this is a blanket coverage, you can also add on any other types of liability insurance such as products liability, workers comp and more.
- Employment practices liability: This covers a variety of situations such as discrimination claims or wrongful termination claims (for example if they terminated an employee without the proper notice).
- Workers' compensation insurance: This covers injuries that happen to an employee on the job for which the employer is responsible. It's important that the policy covers for injuries at home since the employee obviously won't be able to work.
- Fraud insurance: This is different from the other types of coverage we've mentioned because it protects against fraud and identity theft. Some agents will tell you that you don't need this since everything on your payment statement is valid and can be verified. However, I think it can be helpful to have as a backup in case your check or credit card statement gets stolen or someone steals your ID (which is how some people get into other peoples' accounts).
- Umbrella insurance: This covers losses not covered by other types of insurance policies. This is another type of insurance that's important in a business since you don't want to be left high and dry if an unforeseen event happens. As I said, we do have full replacement costs so I'd like to at least know that we have a few hundred thousand dollars in our savings account should the worst happen.
- Employer's Liability Insurance: This is also different from the commercial general liability policy since it only covers workplace injuries and not other types of property damage or bodily injury claims. It covers the company for any lawsuits that arise from their employees doing things they're legally not allowed to do.
Conclusion
Insurance is one of those things that most people don't think about until they actually need it. It's not something that you want to skimp on because if you do, then you'll be in for a huge surprise when you have to file a claim or your coverage doesn't pay what you thought it would.
I know we've had some experience with this since our agent recommended we take full replacement costs (and not just a set price) and I'm glad we listened because now our truck and equipment are all covered. If anything ever happens, then at least we know that the insurance company will have no choice but to replace everything at current market value (for better or worse).