With more people running businesses from their homes than ever before, understanding the need for home-based business insurance has become increasingly important. While your homeowner's insurance policy may provide some level of protection, it likely falls short when it comes to covering the unique risks associated with operating a business. From general liability to protecting valuable equipment, the right home business insurance policy is critical to safeguard both your living space and livelihood.

In this guide, we'll explore when a standard homeowner's policy might be enough, and—more importantly—when you should consider transitioning to home-based business insurance.

Why you need home-based business insurance

Running a business from your home creates a unique blend of personal and professional risks. While homeowner's insurance covers personal belongings and property, it often excludes coverage for business activities. This gap in protection could leave you vulnerable to financial loss in the event of:

• Liability claims: A client trips on your stairs during a visit.
• Property damage: Your business equipment (like cameras or sewing machines) is stolen or damaged.
• Income loss: Your operations are disrupted due to a fire or another unforeseen event.

Without adequate home-based business liability insurance, you could face significant out-of-pocket expenses or even legal trouble.

Who needs home business insurance?

Not all home-based businesses carry the same level of risk. Some may only need minor adjustments to their current homeowner's policy, while others require more comprehensive coverage. Here are examples of professions that commonly benefit from specialized insurance for home businesses:

• Homemade Goods or Food Sales (e.g., Etsy, Facebook Marketplace, porch pick-up sales of baked goods, etc.)
• Photography
• Music Lessons
• Skill Lessons (e.g., sewing, art, etc.)
• Seamstress/Tailor Services
• Hair/Salon Services
• Podcast Hosts/YouTubers
• Blogging/Freelance Writing
• Fitness/Yoga Instruction
• Laundry Services
• Pet Grooming

Each of these businesses carries unique risks, from client injuries to specialized equipment damage, making it essential to evaluate your insurance needs carefully.

What does home-based business insurance cover?

Depending on the policy, common coverages may include:

• Business Property: Protection for equipment, inventory, and supplies.
• General Liability: Covers injuries to clients or damage to third-party property.
• Business Income: Compensation for lost income if operations are disrupted.
• Professional Liability: Coverage for errors, omissions, or negligence in your services.
• Cyber Liability: Protection from cyberattacks and data breaches.
• Workers’ Compensation: Required if you have employees.
• Commercial Auto: Coverage for vehicles used for business purposes.

Coverage options for home businesses

Depending on your business's size and scope, there are three primary coverage options for home-based businesses:

1. Homeowner's policy endorsement

A homeowners policy endorsement is an add-on to your existing policy, providing minimal coverage for business-related risks.

Who it’s for: Freelancers, such as writers or consultants, who work primarily with a computer and have no client visits or employees.

Advantages:

• Affordable and easy to add to your existing policy.
• Provides basic protection for low-risk businesses with minimal equipment.

Limitations:

• Covers only a limited amount of business property (usually $2,500).
• Does not cover liability for clients visiting your home.
• Inadequate for businesses with employees, inventory, or substantial income.

2. In-home business policy

This standalone policy offers more comprehensive coverage than a homeowners policy endorsement.

Who it’s for: Business owners with moderate risk levels, such as photographers or hair stylists with valuable equipment and occasional client visits.

Advantages:

• Covers higher amounts of business property and liability.
• Includes some coverage for client interactions at your home.
• Can address specific business risks, like loss of business data or theft.

Limitations:

• May not provide sufficient liability coverage for high-risk businesses.
• Does not include workers’ compensation or commercial auto insurance.

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3. Business owner's policy (BOP)

A BOP combines property and liability insurance into one comprehensive policy tailored for small to mid-sized businesses.

Who it’s for: Small businesses with higher risks, such as fitness instructors, pet groomers, or those with employees or substantial inventory.

Advantages:

• Covers business property, liability, loss of income, and extra expenses.
• Tailored for businesses with significant risks, including those with employees or frequent client interactions.
• Can include optional coverages, like professional liability or cyber liability.

Limitations:

• Does not include workers’ compensation, health, or disability insurance (these must be purchased separately).
• Premiums may be higher than other options, depending on coverage needs.

Assessing your risk

To determine the right policy, consider your business's specific risks:

1. Equipment Value: Does your business rely on expensive tools or technology?
2. Client Interactions: Do clients or customers visit your home?
3. Inventory: Do you keep products or materials at home?
4. Income Dependency: Would a business disruption significantly impact your earnings?

When to transition to business insurance

You should consider upgrading to specialized business home insurance if:

• Your business income is significant or your primary source of livelihood.
• You regularly host clients, employees, or customers at your home.
• Your equipment or inventory exceeds your homeowner's policy limits.
• You need additional coverage for liability, professional errors, or cyber risks.

How Christensen Group Insurance can help

At Christensen Group, we understand the unique challenges home-based business owners face. That's why our local Personal Lines and Business Insurance experts are here to help you find the right coverage to protect both your home and your business.

Whether you sell homemade goods, teach music lessons, or produce a podcast, we’ll work with you to tailor a home business liability insurance policy that fits your unique needs. Contact us today to learn more and start properly protecting your livelihood.