Home-based Business Insurance: Costs, Coverage & Companies

Summary

Kimberlee has over 20 years of experience as a financial consultant and insurance agency owner. Her expertise is featured across Fit Small Business life insurance and business insurance content.

Home-based business insurance protects business owners working out of their homes for claims arising from third-party liability, property damage, and more. The most common types of home office insurance are general liability and commercial property insurance. When getting both types, the typical cost of home business insurance ranges from $750 to $1,500 per year.

Kimberlee has over 20 years of experience as a financial consultant and insurance agency owner. Her expertise is featured across Fit Small Business life insurance and business insurance content.

Home-based business insurance protects business owners working out of their homes for claims arising from third-party liability, property damage, and more. The most common types of home office insurance are general liability and commercial property insurance. When getting both types, the typical cost of home business insurance ranges from $750 to $1,500 per year.

Home-based Business Insurance Providers

A home office insurance policy has to consider the nuances of mixing business and personal assets and liabilities. This is why home-based business owners need to find a national carrier with policies tailored to the unique mix of home-based risks.

Top Home Business Insurance Providers

Provider Best For The Hartford Office-based service providers, such as architects and accountants, who have clients come to their home-based office AP Intego Home-based businesses that have one or more employees working on or off-site Hiscox At-home service providers, such as landscapers and plumbers, who take business services to client locations Farmers Part-time, home-based businesses and side hustles that can be adequately covered by home insurance endorsement Progressive Commercial Home-based business that use vehicles to move tools and travel between job sites

Tip: If your home business insurance needs are simple, you should speak with your existing homeowners insurance provider to see if they offer a homeowners policy home-based business endorsement. For example, if you only have a few business-related visitors to your home and you don’t work at remote locations, your general liability needs are probably small.

Also, if your business property is less than $10,000 in value, you generally don’t need a commercial property policy. In both of these cases, a home business endorsement on your homeowners policy is a simple, cost-effective way to extend your coverage.

The Hartford has specialized in small business insurance for 30 years. Their home-based business insurance includes a range of coverage options that can serve the needs of almost any type or size of home business. In addition to general liability and property coverages, their business owner’s policy (BOP) also includes business interruption insurance.

The Hartford is the right choice for home-based businesses that have clients coming to them. These include home-based tax preparers, counselors, or tutors who see clients at their home, which increasing their exposure to third-party claims. The Hartford BOP provides the necessary general liability coverage at a very affordable price.

AP Intego’s nationally licensed agents shop and compare rates from industry-leading companies such as Travelers. They specialize in all the coverage options that a home-based business needs. With AP Intego, you can choose multiple payment options and receive complementary ongoing support for each policy purchased.

AP Intego is the right choice for a home-based business that has employees working on or off-site. The broker is a pioneer for pay-as-you go workers’ compensation insurance that helps small business owners manage the hefty expense of workers’ comp premiums based on real payroll reports rather than exaggerated estimates.

Hiscox is a large, highly-rated insurance company that offers a wide variety of small business insurance. Their home office insurance product includes the basics, such as general liability, professional liability, and a business owner’s policy. Rates for Hiscox include a business owner’s policy starting at just $30 per month.

Hiscox is the right choice for service providers such as landscapers, plumbers, and electricians who operate a home office but work off-site. Hiscox has a large appetite for artisan contractors with policies affordably priced for jobs that are typically considered higher-risk occupations.

Farmers has a good combination of qualities that fit the needs of most home-based business owners, including easy online access to information and quotes, standard coverage types, and a business owner’s policy (BOP) option. Where Farmers stands out in comparison to our other top providers for home businesses is the option to work with a local agent.

Farmers is the right choice for homeowners who have a part-time business run from the home. Side hustles, such as consulting or even multilevel marketing, may not be full-time gigs and are often adequately covered with a homeowners policy endorsement. By using Farmers for home and business insurance in this respect, home-based business owners can take advantage of multiline discounts for home and auto insurance.

Progressive Commercial is a national insurance provider known for transparent premium quoting and competitor analysis. Progressive Commercial offers many business insurance policies and gives a 10% to 15% discount when multiple policies are bundled.

Progressive Commercial is the right choice for home-based businesses that use vehicles for business purposes. This includes contractors moving tools and supplies to job sites or pool services companies with trucks full of hazardous chemicals. Progressive Commercial is able to leverage its expertise in personal auto insurance to provide quality commercial auto insurance.

How Home-based Business Insurance Works

Home business insurance is not a type of insurance in itself, but rather a collection of policies that businesses operating out of homes usually need. Common home business insurance types include general liability, which covers bodily injury and property damage to third parties, and commercial property insurance, which covers the business owner’s property.

Most home-based business owners find that a business owner’s policy (BOP) is the most cost-effective solution to cover both liability and business assets. BOPs are inclusive policies often starting around $250 annually, and they protect business owners from general liability incidents, business property losses, and business interruption claims.

Some homeowners policies can provide sufficient insurance coverage for a home-based business if an endorsement (add-on coverage) is made to the policy. For example, if all you need to do is increase a property coverage limit from $2,500 up to $5,000, it may only cost an extra $25 every year. If you need to cover business property above $10,000 in value, a commercial property insurance policy is the better choice.

Home-based Business Insurance vs Home Insurance

It’s important for home-based business owners to know the differences between home office insurance and home insurance. In general, home-based business insurance is commercial insurance for business owners working out of their home. Home insurance is a personal homeowners policy that typically does not cover a business, unless special coverage is added.

You may need home-based business insurance if you have:

Clients in home: Business-related visitors, such as clients, customers, or vendors, coming to your home indicates you need commercial general liability.

Business-related visitors, such as clients, customers, or vendors, coming to your home indicates you need commercial general liability. Business property: Any computers, equipment, or inventory that is exclusively for business use and worth more than $10,000 should be insured on a commercial property policy.

Any computers, equipment, or inventory that is exclusively for business use and worth more than $10,000 should be insured on a commercial property policy. Professional services: Business owners who provide a service for a fee, such as financial advice or bookkeeping, should have errors and omissions insurance.

Business owners who provide a service for a fee, such as financial advice or bookkeeping, should have errors and omissions insurance. Employees: Hiring employees other than family members may mean you need workers’ compensation insurance, depending on state requirements.

If any of the above applies to you, a home insurance policy would not likely cover your business activities. Home-based business with less risk, such as business property that costs under $10,000, may be able to add a homeowners policy endorsement to their existing home insurance. However, this coverage may be limited to business assets and not have extensive liability coverage.

Types of Home Business Insurance

Most home businesses need at least two types of business insurance, such as general liability and property insurance. Some types of home businesses, such as those that provide a service for a fee like financial planners and bookkeepers, need errors and omissions insurance. Businesses with employees may be required to get workers’ compensation insurance.

Common Types of Home Business Insurance

Type of Insurance What It Covers Commercial General Liability Third-party bodily injury, property damage, or advertising injury claims Commercial Property Insurance Damage to property used for business purposes, such as equipment, furniture, or inventory Errors & Omissions Injuries or financial damages due to your professional mistakes, negligence, or bad advice Workers’ Compensation Medical bills and partial lost wages for employees' work-related illnesses and injuries Homeowners Policy Endorsement Adds basic business property and limited liability coverage to an existing homeowners policy

Commercial General Liability

More information about the most common insurance types home-based business owners need is listed below.

Commercial general liability insurance covers third-party bodily injury, property damage, and related medical and legal costs. This is important coverage in the event a third party, such as a client or customer, is injured when visiting your home for business reasons. General liability also covers you if you are at a remote location, such as a client’s premises.

Who Needs Commercial General Liability Insurance

Home businesses that work with the public need commercial general liability coverage, especially if the homeowners policy excludes this coverage or has low limits (such as the standard $100,000). It’s smart to have at least $500,000 for business liability. If you have business-related visitors coming to your home or if you do business at other locations, you need commercial general liability.

Keep in mind that your home-based business may be able to get coverage through your homeowners policy. Eligibility is based on your insurance provider. Before buying a separate general liability policy, check with your provider to see if your business is eligible for a policy endorsement to cover business liabilities.

For example, if you run a small clothing boutique out of your home and you keep less than $10,000 of inventory stored in your home, you may qualify for a homeowners policy endorsement to get the property insurance coverage your business needs.

Who Doesn’t Need Commercial General Liability Insurance

Home business owners who do not work directly with the public won’t need commercial general liability. This is because the purpose of general liability is to protect your business against third-party bodily injury and property damage. Therefore, if you don’t have business-related visitors in your home and you don’t visit customers or vendors at off-site locations, you are less likely to need home business liability insurance. Keep in mind that you still have risks such as advertising injury or products completed claims.

Commercial Property Insurance

Commercial property insurance covers damage to business-owned items due to certain covered events, such as fire, theft, vandalism, or hail. Property needing coverage includes building, equipment, office furniture, and inventory. If the business’ property is damaged or destroyed, the property insurance helps cover the cost of repair or replacement.

Who Needs Commercial Property Insurance

Home businesses with tangible assets that are needed for daily operations and are expensive to repair or replace need commercial property insurance. It’s important to note that a standard homeowners policy does not always cover business property.

Examples of home-based business property that might need property insurance coverage for risks include computers, printers, and inventory. An ecommerce business like an Amazon Fulfillment by Amazon (FBA) business is a good example of where this would apply. Also, businesses where owners work at clients’ location but store their equipment at home (e.g., the garage), such as landscapers and handymen, may need commercial property coverage.

Who Doesn’t Need Commercial Property Insurance

Home-based business owners who don’t have high-value business assets inside their home or who store their business property in an off-site storage unit may not need commercial property coverage. Also, if you use personal property for business, you likely won’t need it. For example, a freelance writer who uses their personal laptop computer for both personal and professional work doesn’t need commercial coverage because their homeowners policy most likely covers it.

Errors & Omissions Insurance

Errors & omissions insurance (E&O), also called professional liability insurance, is a policy that protects professionals and service-oriented business owners against liability claims arising from their mistakes or negligence. E&O covers legal and defense costs as well as settlements if you are sued by a client for damages caused by your unintentional errors, including incorrect advice or accidental violation of a contract.

Who Needs E&O Insurance

The primary type of home businesses that need errors and omissions insurance are those that provide professional services or advice for a fee. For example, if your negligence or advice could possibly cause financial harm to a client, you need E&O coverage in case a client sues you for damages.

Here are examples of professionals who typically need E&O insurance:

Accountants and bookkeepers

Legal services

Financial advisors

Architects

Computer programmers

Personal trainers

Business consultants

Real estate agents

Keep in mind that your professional services aren’t covered by your homeowners policy, nor are they included in general liability or commercial property insurance. Some home-based businesses may need a combination of a homeowners policy endorsement for business liability and property coverage plus E&O insurance to meet their insurance needs.

A few examples of home-based businesses that need liability insurance are:

Who Doesn’t Need E&O Insurance

Businesses that are not at risk of a lawsuit resulting from bad advice or unintentional errors do not need E&O insurance. Examples of business owners who usually don’t need errors and omissions coverage include ecommerce business owners and multilevel marketing (MLM) business owners. However, ecommerce business owners want to make sure they have products-completed coverage, and MLM owners should inquire with the parent company about group rates and policies directly from the organization to cover professional liability.

Workers’ Compensation

Home-based business owners with employees usually need workers’ compensation insurance even if their workers are remote. The policy is mandatory in every state except Texas, and provides benefits to employees if they suffer a work-related injury or illness. Workers’ comp covers medical bills, wages from lost work time, and more. The cost of workers’ comp varies widely from 12 cents to $12.00 per $100 in employee wages, depending on the type of work performed.

Who Needs Workers’ Compensation

Most states require businesses with employees to have workers’ compensation. Some states require workers’ comp if you have just one part-time employee, while others require coverage with three or more. To see workers’ comp requirements for your home business, check these state-by-state laws provided by the National Federation of Independent Business (NFIB).

Who Doesn’t Need Workers’ Compensation

According to the International Risk Management Institute (IRMI), over 90% of home-based businesses do not have employees. If your home business doesn’t have employees, or if you have fewer employees than your state’s minimum requirement for coverage, you don’t need workers’ compensation insurance. Also, workers’ comp is often not required for employees who are also owners.

Homeowners Policy Endorsement

A homeowners policy endorsement is an extension of coverage added on to an existing homeowners insurance policy. Many insurers offer endorsements specifically for people who run a business out of their homes to cover third-party bodily injury and property damage claims or to repair or replace business property. Some endorsements cost as little as $25 year.

There are two primary types of endorsements your home-based business may need:

Homeowners business liability endorsement: Adds business liability coverage on a homeowners policy for coverage in case clients or suppliers get hurt visiting your premises. Homeowners business property endorsement: Adds coverage to a homeowners policy for equipment, such as computers and printers, as well as inventory and other business-owned property.

According to the Insurance Information Institute (III), a home-based business may raise policy limits on a homeowners policy from $2,500 to $5,000 for as little as $25 year. Some insurance companies allow you to increase your home business coverage up to $10,000, in increments of $2,500.

Who Needs a Homeowners Policy Endorsement

Home-based businesses that do not have significant liability risks or high-value business property to protect are good candidates for a homeowners policy endorsement. For example, if you have infrequent business-related visitors and business property valued at less than $10,000, a homeowners policy endorsement may provide sufficient coverage for your needs.

“The definition of the term ‘business’ contained in a specific homeowners policy is extremely important, but generally courts have held that a ‘business’ or ‘business pursuits’ require two elements: continuity and profit motive. If one of those elements is missing, it is possible that the activities in question are not a ‘business,’ and there is no need for home-based business insurance.” – Tom Drennan, Partner, Dinsmore & Shohl, LLC

Who Doesn’t Need a Homeowners Policy Endorsement

Home businesses that need extensive liability and property coverage do not need an endorsement because they should most likely buy separate commercial policies or a business owner’s policy instead. For example, home businesses that have high client traffic, such as a beauty salon, probably need more third-party liability insurance than most homeowners policies offer.

Typical Home-based Business Insurance Costs

Type of Insurance Average Annual Premium Average Deductible Commercial General Liability $250-$500 $0-$1,000 Commercial Property Insurance $500-$1,000 $1,000-$2,500 Professional Liability

(Errors & Omissions)

$800-$1,200 $25,000-$50,000 Homeowners Policy Endorsement $25-$50 to increase existing policy by $2,500 to $5,000 $500-$1,000 Workers' Compensation $0.12 to $12.00 per $100 in employee wages in most states None

Most home-based businesses don’t need multiple insurance policies, and some businesses may get the coverage they need by simply adding a homeowners policy endorsement. For businesses that need broader coverage, a business owner’s policy (BOP) can be a smart choice. BOPs bundle general liability and property insurance into one cost-effective, single-premium package.

For example, many home-based businesses can get the coverage through general liability and commercial property insurance, which may cost $1,000 each per year. However, they could get similar coverage for $1,200 annually if they purchase a BOP.

Cost of a Home-based Business Endorsement

A home-based business endorsement added to a homeowners insurance policy is a quick and cost-effective way to get coverage for liability and minimal property needs. Most home-based business endorsements can be added for as little as $25 a year to existing homeowners insurance policies.

Tips on Applying for Home-based Business Insurance

Applying for home-based business insurance is similar in process to applying for other types of business insurance. Some home businesses may be able to add basic business coverage to their homeowners policy while others will need to buy additional home-based business policies.

Here are three key tips to remember when applying for home-based business insurance:

1. Know What Types of Home-based Insurance You Need

You don’t want to buy too much coverage, but being underinsured can cost much more than policy premiums if you have a claim. Home-based business owners who meet with clients at home offices, store inventory or equipment, or hire employees all need some sort of coverage.

2. Confirm What’s Covered on Your Homeowners Policy

Before shopping for commercial coverage, most home-based business owners should check with their home insurance providers. Although most homeowners policies don’t cover business claims, most providers can extend coverage on the existing policy or add a homeowners policy endorsement if all that is needed is small additions.

For example, if all you need to do is increase a property insurance limit from $2,500 up to $5,000, it may only cost an extra $25 annually. But if you also need an additional $500,000 in liability coverage, you may have to buy a separate commercial liability policy. A smart way to confirm what’s covered and what’s not covered in your homeowners insurance is to speak with your provider or agent.

“The liability coverage extension from your homeowners policy will be the most important coverage. Insureds should also ask their agent if they are able to extend coverage to business property. If so, the business property will be protected in a covered event. If the business owner is unable to extend property coverage, they should consider getting a commercial property insurance policy, especially if they have made a significant investment in inventory or equipment for their business.” – Brad Goldsberry, Agent, Farmers Insurance

3. Get Multiple Quotes

When shopping rates for home-based business insurance, be sure to get quotes from at least three different providers. This enables you to get multiple opinions on the best coverage types for your home business and to compare quotes. After comparing rates and coverage, you’ll be prepared to buy the best home business policy at the best rate.

Home Business Insurance Frequently Asked Questions (FAQs)

If you’re like most other home-based business owners, you have several questions about what types of insurance you may need or if you need additional coverage for your business at all. These FAQs may help answer those questions.

How do I know if I need home business insurance?

Every business has some need to protect against liability and property loss; it’s a matter of how much. Generally, you need home-based business insurance if your homeowners policy does not cover your business or if a homeowners policy endorsement is not sufficient to cover your business. Keep in mind that some clients may require proof of insurance to work with you.

Does homeowners insurance cover business property?

A homeowners insurance policy typically does not cover business property. If your policy does include commercial property, the coverage may be inadequate. The average homeowners policy limit on property coverage is $2,500, which may be too low, especially if you have equipment, such as computers, or inventory valued higher than your limits.

Is home-based business insurance tax deductible?

According to IRS Publication 535, home business owners can deduct the cost of premiums on most business insurance policies, such as general liability and commercial property insurance, from their taxes. The IRS does not allow you to deduct losses arising from business interruptions, such as after a flood or fire.

Does a part-time home business need insurance coverage?

Some home-based businesses, such as one that is temporary, may not be considered businesses in a court of law and therefore do not need commercial business insurance. Call your homeowners insurance agent to determine if your activities are a business or a hobby covered by personal insurance.

Bottom Line

All home-based business owners should consider getting insurance coverage because most homeowners policies won’t cover business-related claims. If your insurance needs are simple, such as $5,000 to $10,000 of liability and property coverage, you may be able to add coverage with a homeowners policy endorsement.

Buying home-based business insurance doesn’t need to be complicated or expensive. The Hartford has comprehensive coverage for great prices. Most businesses are able to get coverage within minutes through The Hartford online system, which offers free and easy-to-understand quotes.

Visit The Hartford

Home-based Business Insurance: Costs, Coverage & Companies
Photo Credit: fitsmallbusiness.com

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