More than half of America's businesses are home-based, according to the U.S. Small Business Administration. But setting up headquarters in your home doesn't mean your homeowners insurance will adequately protect your operation.
"A typical homeowners policy provides about $2,500 of coverage," says Loretta Worters, vice president of communications for the Insurance Information Institute. That usually will cover equipment — but it won't offer liability protection or cover you for lost data or income.
Do your research to protect yourself and your home business. "An important thing for any business owner to do when starting out is to create a business plan," says Worters. "That includes having the right type and amount of insurance coverage."
In general, home-based business owners have three basic options:
Homeowners policy endorsement: This is added to a homeowners policy to increase coverage on business equipment. There also may be the option to buy a homeowners liability endorsement for protection in the event someone — say, a delivery person — is injured on your property.
- In-home business policy: An in-home business policy provides more comprehensive coverage for business equipment and liability than a homeowners policy endorsement. These policies, which may also be called in-home business endorsements, vary significantly depending on the insurer.
- Business owners policy: Also called a BOP, this plan offers the most comprehensive coverage for small- and mid-size businesses. It protects against many of the same things that in-home business policies do, but offers even more coverage.
Being a savvy home-business owner is about more than having the right insurance. Other factors to consider include:
- Additional insurance: Re-evaluate your coverage as your business grows and your needs change.
- Zoning laws: Visit your local planning office to review restrictions that could affect your business.
- Licenses and permits: Find out which licenses and permits you need to run your business legally.
- Taxes: Talk to a tax professional about tax laws for home-based businesses. Also research money-saving deductions, such as the home office deduction.
Not sure if you're adequately protected? Meet with your State Farm agent® to discuss the insurance needs of your home-based business.
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