Options when insuring your home business

Homebased businesses might require small business insurance since homeowners may not cover business needs.

Mother considering insurance for her home business.

What are some ways to insure your home business?

Around half of America's businesses are homebased according to Fundera. But setting up headquarters in your home doesn't mean your homeowners insurance will adequately protect your operation, so it is a good idea to consider getting home business insurance.

A typical homeowners policy provides limited business coverage that may include electronic data processing equipment — but it may offer liability protection or cover you for lost data or income.

Do your research to protect yourself and your home business. When you are starting your own business, you may benefit from creating a business plan which usually includes topics like insurance and retirement needs. Here are three options to consider when insuring your homebased business.

A homeowners policy with increased business property limits

Your homeowners policy may cover up to $1,500 worth of personal property, such as a desk or merchandise held as samples, e.g., Mary Kay Cosmetics. This coverage protects business property while it's used or stored inside your home. The policy may also offer up to $750 worth of coverage for your business property while it's away from your home. If your homebased business is small, this might be enough coverage. If not, there may be options to increase those coverage amounts with a homeowners policy endorsement.

You might consider adding a homeowners policy endorsement to your existing coverage if you:

  • Plan to have less than $4,999 worth of business property kept at your homebased business location.
  • Don't invite customers to your homebased business location.
  • Only have $750 worth of personal property intended for business use outside your home.

An in-home business policy

An in-home business policy provides more comprehensive coverage for business equipment and liability than a homeowners policy endorsement. These endorsements, which may also be called in-home business endorsements, vary significantly depending on the insurer.

A business owner policy

While your homeowners insurance policy might come with liability protection for certain incidents that happen inside your home, it does not extend to homebased, business-related activities. For example, if a customer comes to your home to exchange payment for goods or services and suffers an injury, there may not be coverage under your homeowners policy. Coverage gaps can easily be fixed with a business owners insurance policy.

You might consider a business owner insurance policy if you:

  • Provide services directly to customers while in your home, such as tax preparation or hair services, which may require additional specialized liability coverage.
  • Plan to have $5,000 or more worth of business property kept at your homebased business location.
  • Rely on the income from your business to support your household.

Considerations for home business owners

Being a savvy home business owner is about more than having the right insurance for your business. 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 homebased businesses. Also research money saving deductions, such as the home office deduction.
  • Vehicles: If you're using your vehicle for homebased business-related activities, ask your agent about getting it rated as a business vehicle on your auto policy to make sure it's properly covered.

Not sure if you're fully protected? Meet with your State Farm® agent to discuss the insurance needs of your homebased business.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

This is only a general description of coverages and is not a statement of contract. Details of coverage or limits vary in some states. All coverages are subject to the terms, provisions, exclusions and conditions in the policy itself, and in endorsements.

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