clients. If liability is limited to acts of neg- ligence, the professional liability insur- ance policy is known as an errors and omissions policy. “No matter how industrious you are,
one uninsured event relating specifically to your home-based business can deal a significant financial blow to the company. The key to protecting your home-based business is securing the appropriate cov- erage,” noted Barry. The Independent Insurance Agents &
Brokers of America (IIABA) commis- sioned a study in 2004 which found nearly 40 percent of home-based business own- ers had not purchased insurance because they thought they were protected by some other type of coverage; 30 percent said their businesses were too small to insure; and nearly 20 percent could not give a rea- son for not having the coverage. Insurance companies differ consider-
ably in the types of business coverages they offer. Some may meet the specific needs of your business, while others may not. So it is wise to shop around for cover- age options as well as competitive pric- ing.
When insuring your home-based busi-
ness, there are three basic choices, de- pending on the nature of your business and the insurance company you buy it from. They are as follows:
Homeowners Policy Endorsement You may be able to add a simple en- dorsement or rider to your existing home- owners policy that doubles the $2,500 standard coverage for business equipment such as computers. For an additional pre- mium charge, you can raise the policy limits for losses related to a home busi- ness to $5,000 or $10,000. Adding an endorsement to your home-
owners policy is the least expensive op- tion, but it might not be sufficient if you have a lot of expensive business equip- ment. It also does not provide business li- ability or business income coverage. You can buy a homeowners liability endorsement that will protect you in case clients or delivery people get hurt on your premises and sue. The homeowners liabil- ity endorsement is typically available only to businesses that have few business-relat- ed visitors, such as writers. But some in- surers will provide this kind of endorse-
The Black E.O.E. Journal
“No matter how industrious you are, one uninsured event relating specifically to your home-based business can deal a significant financial blow to the company. The key to protecting your home-based business is securing the appropriate coverage.”
ment to piano teachers, for example, depending on the number of students. These endorsements are available in most states.
In-Home Business Policy An in-home business policy provides
more comprehensive coverage for busi- ness equipment and liability than a hom- eowners policy endorsement. Many insur- ance companies offer insurance policies specifically tailored to small business. The average home-business insurance policy can cost anywhere from $250-$500. The cost depends on the type of business you operate, the kinds of safety features that are in place and the amount of coverage you decide upon. In addition to protection for your busi-
ness property, most policies reimburse you for the loss of important papers and records, accounts receivable and off-site business property. Some will pay for the income you lose (business, or income, in- terruption coverage) in the event your home is so badly damaged by a fire or other disaster that it cannot be used for a certain period of time. Others will also pay for the extra expense of operating out of a temporary location. Some in-home business policies cover
a certain number of full-time employees, generally up to three. In-home business policies generally in-
clude broader liability insurance for high- er amounts of coverage. They may offer protection against lawsuits for injuries caused by the products or services you of- fer, for example. In-home business policies are available
from homeowners insurance companies, which offer business insurance bundled with a standard homeowners policy. Stand-alone in-home business policies are
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also sold by some specialty insurers; in this case you do not also have to purchase your homeowners insurance from the company.
Businessowners Policy (BOP) The Businessowners Policy, known in
the insurance industry as a BOP for short, is one of a number of package policies de- signed to meet the insurance needs of various kinds of businesses. The key to whether a business owner is eligible for a BOP is the size of the premises, the limits of liability required, the type of commer- cial operation it is and the extent of its off- premises servicing and processing activi- ties.
A BOP, like an in-home business poli-
cy, covers business property and equip- ment, loss of income, extra expense and liability; however, the BOP provides these coverages on a much broader scale. A BOP doesn’t include workers com- pensation, health or disability insurance. If you have employees, you will need sep- arate policies for these coverages. If you are using your car for business activities— transporting supplies or products or visit- ing customers—you need to make certain that your automobile insurance will pro- tect you from accidents that may occur while you are on business. As is the case with any insurance poli-
cy, a safe work environment can help low- er property premiums. Make sure you have fire detectors and a security alarm system. Also have a computer-data back- up procedure, and store the data backup away from your home. If you have an ef- fective system, it may not be necessary to pay an additional premium for loss of business data.
Source: Insurance Information Institute 93
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