So you decided your regular job isn’t enough, and you want to make some extra money from home or with a side job. Perhaps you started hosting handbag parties, selling art on Etsy, maybe even using your car as a taxi cab through Uber or Lyft? Maybe you simply got a new job delivering pizzas or newspapers. You might not have thought about it, but does your existing insurance cover you should something happen while you’re on the job? Odds are that it doesn’t.
In many of the scenarios listed above, people who are making extra money in these ways and others are operating a small business. As such, the standard homeowners insurance policy and even auto insurance policy won’t cover accidents or injuries that occur as a result of, or during the performance of, your work. Without proper small business insurance, if something were to happen to a customer on your property or while you were driving someone to the airport, you could be held financially responsible for rectifying the situation.
Home Based Business: A Financial Risk?
Home-based businesses can be an excellent way to make extra money. In fact, many big businesses started in someone’s home or garage. You might be surprised to learn that there are currently about 18 million home-based businesses operating in the United States, and one of them is bound to be the next big thing. However, these extra sources of income could also turn into a huge liability if you haven’t given consideration to properly insuring your small business. Independent Insurance Agents of America Inc. estimates that about 60 percent of small, home-based businesses are operating without proper insurance.
Many people are under the mistaken impression that a home-based business doesn’t need additional insurance – that a simple homeowners policy or auto insurance policy will cover them in the event of a loss. However, most homeowners and renters insurance policies have a “business pursuits” exclusion that caps reimbursement for covered losses at just $2,500. That’s not near enough coverage when you consider how much it would cost a graphic designer to replace his or her computer in the event of a fire.
With regards to giving rides with companies such as Uber or Lyft, most standard auto insurance policies will not cover accidents that occur while using your personal vehicle as a taxi service. As far as whether using your car for other incidental work related trips is a covered activity, that would depend on your individual policy, and the work you are performing. In some cases, you would have coverage while in others you would not.
Multiple Coverage Options Available
Businesses are different, some are home based while others are not. Some have customers on-site, others do not. Some have employees; others do not. As a result, there are multiple coverage options available, depending on the needs of your particular small business.
Business Owner’s Policy (BOP)
A BOP offers broad protection and is a good choice for small businesses such as an auto mechanic, electrician, plumber, and other similar service-based businesses. A BOP provides liability and property damage, and can offer protection from loss of income and more. BOPs also often cover damages caused by products you’ve sold or services you’ve performed.
Home Office Policy
A Home Office Policy offers less coverage than a BOP, but can be appropriate for some businesses that have less exposure. It’s actually a combination of a homeowners’ insurance policy and a small business insurance policy. These policies offer coverage for general business liability, theft, lost income due to damage to the home, and more. However, they do have less coverage for off-site damages than a BOP. A Home Office Policy may be an excellent choice for creative freelancers and other small businesses with limited exposures.
Business Pursuits Endorsement
A Business Pursuits Endorsement offers the least protection of those outlined in this post. An endorsement is simply extra coverage added to your current homeowners’ insurance policy to expand its coverage of business pursuits performed in the home. With that said, it could be a good choice for some small businesses that never have customers on-site, which don’t carry a lot of inventories, and if you don’t have a lot of costly equipment.
Summary
Of all the policy types listed above, they still may not provide all of the coverage you may need. You may also require commercial auto insurance, professional liability coverage, worker’s compensation, or health and disability insurance. So as you can see, your small business, whether it is home based or not, could put you financially at risk. Call Homewood Agency today. Monty Homewood will be able to help you determine the policies that would be best for your situation, making sure you and your small business are properly protected from the financial liability.
As you can see, your small business, whether it is home-based or not, could put you financially at risk. Call Homewood Agency today. Monty Homewood will be able to help you determine the policies that would be best for your situation, making sure you and your small business are properly protected from the financial liability.
