Generally speaking, homeowners insurance does not cover your home business. Some standard homeowners policies cover a maximum of $2,500 for business equipment in the home, but none cover business-related liability or other losses.

If you run a business from your home (and there are about 12 million Americans who do), it is likely that you need both property insurance to cover fire and theft and liability insurance to cover anyone who gets hurt by using your product or who gets hurt on your property.

What kind of losses do you need insurance protection for?

As a business owner, you will need insurance to cover the following types of losses:

  • Property and equipment damage or loss from fire or theft
  • Customer or supplier injuries on your property, or caused by your product
  • Advertising liability
  • Inability to collect accounts receivable
  • Business record damage or loss
  • Lost income due to damage to your home

What kind of policies are available?

If you operate a home day-care service or if your company is “incidental” (which means it grosses less than $5,000 per year), you may be able to simply add an endorsement to your existing homeowners policy.

Perhaps a package policy for your small home-based businesses is the key. This package usually covers loss or destruction of business property on or off the premises, loss of valuable papers, personal injury and advertising liability, and accounts receivable protection.

Typically, if you purchase a package policy, you’ll also want to purchase homeowners and auto policies from the same company. This way, the package plan extends the property and liability coverage on your home and car to your business. This prevents gaps or duplication of coverage.

If the package policy is not available to you (not all states allow them), you will have to buy individual policies, such as business property, general liability, and business income insurance.

What other types of insurance policies might you need?

  • CAR INSURANCE Your existing personal car insurance policy may cover some of the business tasks you use your car for. However, depending on the type of vehicle and what it’s used for, you may need a separate business automobile policy.
  • HEALTH AND DISABILITY INSURANCE  You need health insurance in case you become sick and incur medical expenses, and disability insurance if in case you become unable to work because of illness or injury. If you have employees, you may want to consider offering a group policy, if your business is eligible.
  • WORKERS’ COMPENSATION  You are required by law to have a workers’ compensation insurance policy in place if you have employees working for you on the premises. These laws vary from state to state, so check with your insurance agent or your state’s insurance department to find out exactly what you need.