By Ted Devine, CEO of insureon
In the U.S., more than half of all small businesses are based in the owner’s home. Someone starts a new home-based business every 11 seconds, and together these tiny powerhouses account for 10 percent of the country’s GDP. But a whopping 60 percent of home businesses have no insurance whatsoever for their equipment or workspace, which translates to a major risk exposure for millions of Americans.
There are two major reasons home-based business owners fail to invest in insurance for their businesses:
- They think they’re covered under their Homeowner’s Insurance policy. In reality, most Homeowner’s policies explicitly exclude coverage for business-related property and liability. In other words, if your house and home office are damaged in a fire, you may be able to collect benefits from your Homeowner’s policy to rebuild your living quarters and replace your furniture, but the policy probably won’t pay for you to rehab the office or replace your work computer and printer.
- They don’t think they can afford insurance. This couldn’t be further from the truth. Insurance companies recognize that home-based businesses usually have a pretty low risk profile, and they price their coverage for home businesses accordingly. Some policies are available for as little as $159 per year – that’s less than $13 a month!
Which Types of Insurance Do Home-Based Businesses Need? Another reason some home-based business owners avoid buying insurance? They simply aren’t sure which kind to buy. Luckily, that’s a pretty easy problem to solve. Most home businesses can secure decent protection through a Business Owner’s Policy (also called a BOP). This policy combines General Liability Insurance, which protects against third-party lawsuits, and Property Insurance, which protects business property (including computers).
The BOP is a bundled policy designed specifically for smaller businesses and offers a discounted premium (in the same way that buying Internet and cable together gets you a discount on both).
If you do a lot of driving for your business, whether to consult with clients, deliver orders, or actually provide your services, you may want to supplement your BOP with a Hired & Non-Owned Auto Policy. This is because most Personal Auto policies, like Homeowner’s policies, specifically exclude coverage for business-related driving and accidents. If you make a claim and your insurance provider can prove that you were using the car for business purposes, they’ll do everything in their power to deny the claim on that basis. It’s unfortunate, but that’s the reality of the situation.
The bottom line? A small investment in business insurance can protect home-based business owners from catastrophic losses.
Ted Devine is CEO of insureon, the nation’s leading online agent for small and micro businesses. Prior to joining insureon, Devine held many senior leadership positions at Aon Corporation and spent 12 years as a Director of McKinsey & Company. He lives in Chicago with his family.