07/ 15/ 2004
by Jeffrey Moses
Every owner of a home-based business should consult with an agent experienced in insuring small businesses. Normally, your homeowner’s policy will cover some business-equipment coverage costs in the case of losses due to fire or theft, but if you’re not completely familiar with the details of your homeowner’s policy, snags could develop when making a claim. You may find, for example, that business equipment is excluded from coverage or that the policy’s deductible for computer equipment is higher than the replacement cost. Even worse, you might find that simply having a business in your home voids your homeowner’s coverage.
To eliminate surprises, outline every aspect of your business with your insurance agent. The following points should be detailed:
- Type of business
- Average monthly business revenue
- The number of customers on average who come to your business daily or weekly
- List of business equipment you use
- Dollar amounts for replacement of equipment (at current prices)
- Dates of equipment purchase (include serial numbers of equipment)
- Additions or alterations to your home that are specific to business use
- Vehicles used for business activity (designate personally owned, or owned by the business)
- Average mileage per year driven for business
- Number of employees
- Do your employees occasionally use their own vehicles for your business?
- Type and value of business inventory stored in office or other parts of home
Your agent may determine that a few simple additions to your homeowner’s policy will provide adequate coverage. But, if you have a considerable amount of equipment (or very expensive equipment), a separate structure used for business (such as a refurbished garage), a steady stream of customers coming to your home office or vehicles used exclusively for business, you may need to put separate business insurance into place.
When insuring your business equipment, be sure to purchase “replacement cost” coverage, which will enable you to buy comparable equipment, even if prices have gone up since your original purchase. “Value-only” coverage may mean that you will not be able to duplicate what you had without paying extra. When listing your equipment with your agent, include computers, all peripherals, phones, copy machines, faxes and printers. Don’t forget to add software to your coverage.
Separate business liability coverage should also be purchased in most instances. This will protect you in case a customer or delivery person trips and falls on your sidewalk and sues. Don’t assume that your homeowner’s policy will cover you in these instances. Most will exclude liability when an accident occurs in the course of business.
If you drive a lot for business using your personally owned vehicle, your agent will probably suggest adding general liability coverage for business purposes to your auto insurance. This will cover you if you should injure someone or damage property while driving while on business. Often a simple rider to your existing coverage will be enough, but in some cases, you’ll need to purchase a separate policy. This should, however, be relatively inexpensive. If you own and operate vehicles exclusively for business, or have vehicles owned by your business, you’ll probably need to purchase dedicated business vehicle insurance.
Don’t overlook the hidden danger of employees or business partners who use their vehicles for deliveries or pickups. If they cause an accident while driving for your business, you and your business may be liable. Your agent can suggest appropriate insurance for this, often called “employer’s non-owned vehicle liability coverage.”
A good business insurance policy will also cover loss of income due to home damage or theft. If your home is damaged or your computer stolen, you may be unable to work for some time. Loss of income coverage will provide a specified weekly amount in case of such loss.
Depending on your specific type of business and countless other variables, you may need to purchase additional insurance coverage. An experienced insurance agent will help you with this. Just be sure that you provide complete information about your business so you won’t find yourself without coverage (or without adequate coverage) should a loss occur.
