More than half of America’s businesses are home-based, according to the U.S. Small Business Administration. If you currently run a home-based business or are considering it in the future, don’t make the mistake of assuming your homeowners insurance policy provides coverage for your business needs when the unexpected happens.

A common misconception is that homeowners insurance policies offer coverage for a home-based business. However, homeowners policies usually provide no more than $2,500 to replace damaged or stolen business equipment.

Standard homeowners insurance policies provide neither business liability nor business income (also known as business interruption) coverage for home-based businesses. These forms of protection are necessary in case an employee or customer is injured on the premises.

Coverage Options for an In-Home Business

When insuring your home-based business, there are three basic choices, depending on the nature of your business:

1. Homeowners Policy Endorsement. This provides the least amount of coverage and, therefore, is not ideal for most home-based businesses (depending on the level of risk). It may provide enough coverage for a freelance writer with one computer and no business foot traffic. But it’s not enough for someone who employs others, has clients visiting his or her home or has valuable business equipment and/or inventory.
2. In-home Business Policy. More comprehensive than a homeowners policy endorsement, in-home business coverage is a stand-alone policy that provides higher amounts of coverage for business equipment and liability.
3. Business Owners Policy, or BOP. A BOP bundles property and liability insurance into one policy. Created specifically for the small- to mid-size business, a BOP covers your business property and equipment, loss of income, extra expense and liability. It is the most comprehensive property and liability option. It does not include workers’ compensation, health or disability insurance, which are available as separate policies

What’s Your Risk?

While most homeowners insurance policies do cover a limited amount of business equipment—computers, copiers and printers—it’s likely that what you own is worth more than your policy’s limits. Also, your homeowners liability insurance probably won’t cover injuries that may occur to employees or clients on your premises.

Properly insuring your home-based business is crucial to protecting both your business and your home. At Neckerman Insurance, we understand the small business owner’s personal and business needs; we can help you tailor coverage that’s as unique as the products and services you provide.