Home-based business insurance protects business owners working out of their home 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 average cost of home business insurance ranges from $750 to $1,500 per year.
Getting your home- based business properly covered with general liability insurance is easy with AP Intego. Their team of licensed agents tailor your policy by shopping multiple carriers such as Travelers and AmTrust. They offer flexible payment options, and provide quotes in minutes.
How Home-Based Business Insurance Works
Home business insurance is not a type of insurance in itself, but rather a collection of insurance types that businesses operating out of a home may need. Common types of insurance needed for a home-based business include commercial general liability (CGL) insurance, which covers third-party bodily injury and property damage, and commercial property insurance, which covers property of the business owner.
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 per month. If you need to cover business property above $10,000 in value, a commercial property insurance policy is best.
Some home-based business may benefit by purchasing a business owners policy (BOP), which includes commercial general liability, commercial property insurance, and certain other insurance types, if needed. A BOP is a good idea if you need at least two types of insurance, because they can be packaged together into one BOP for a lower total premium cost (compared to buying policies separately).
Home-Based Business Insurance vs. Home Insurance
It’s important for home-based business owners to know the differences between home-based 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 on.
You may need home-based insurance if:
- You have business-related visitors, such as clients, customers, or vendors, coming to your home. For this, you would need commercial general liability.
- You have business property, such as computers, equipment, or inventory, that is exclusively for business use and worth more than $10,000. For this, you would need commercial property insurance.
- You provide a service for a fee, such as financial advice or bookkeeping. For this, you would errors & omissions insurance.
- You have employees other than family members working with you in your home. For this, you may 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. If the needs of your home-based business are simple, such as covering business property worth less than $10,000, it’s possible that adding on coverage to your existing home insurance policy is all you need. This add-on coverage is called a homeowners policy endorsement.
Top Home-Based Insurance Companies
|AP Intego||Nationally licensed insurance agents who shop and compare policies and prices from industry leading insurance companies.|
|The Hartford||Businesses needing a business owners policy (BOP) with specialized coverage by industry type.|
|Hiscox||Basic coverage at a low cost and quick quotes online.|
|Farmers||Option of online access or working directly with a local agent.|
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 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 will be small.
Also, if your business property is less than $10,000 in value, you won’t need a commercial property policy. In both of these cases, a homeowners policy endorsement is a simple, cost-effective way to extend your coverage.
AP Intego’s nationally licensed agents will shop and compare rates from industry leading companies such as Travelers. They specialize in all the coverage options that a home based business would need. With AP Intego you can choose multiple payment options, and receive complementary ongoing support for each policy purchased.
The Hartford has specialized in small business insurance for 30 years. Their specialized coverage for home-based business insurance includes a range of coverage options that can serve the needs of almost any type or size of home-based business. In addition to general liability and property coverages, their business owners policy (BOP) includes business interruption insurance.
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 the business owners policy. Rates for Hiscox include a general liability policy that averages about $30 and a business owners policy starting at just $42 per month.
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 owners 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.
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, will need errors and omissions insurance. Some businesses with employees may be required to get workers compensation insurance.
Common Types of Home Business Insurance
|Commercial General Liability||The most basic liability coverage that protects you from third-party bodily injury or property damage claims.|
|Commercial Property Insurance||Property used for business purposes, such as equipment or inventory.|
|Errors & Omissions||Injuries or damages due to your mistakes, negligence or bad advice.|
|Workers Compensation||Work-related injuries, medical bills, wage replacement and more for your employees. Required in most states.|
|Homeowners Policy Endorsement||Adds business coverage and higher limits to existing homeowners policy.|
Commercial General Liability
Commercial general liability (CGL) 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, visits your home for business reasons and is injured. CGL also covers you if you are at a remote location, such as a client’s premises.
Who Needs Home Business Liability Insurance
Home businesses that work with the public will 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. If you have business-related visitors coming to your home or if you do business at other locations, CGL is needed.
These businesses would not get the coverage they need from a homeowners policy:
Keep in mind that home-based businesses that are eligible or ineligible for coverage by a homeowners policy will vary based on the insurance provider you use. Before buying a separate commercial general liability policy, check with your provider to see if your business is eligible for a homeowners policy endorsement.
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 add the needed property insurance coverage for your business.
Who Doesn’t Need Home Business Liability Insurance
Home business owners who do not work directly with the public won’t need commercial general liability (CGL) coverage. This is because the purpose of CGL 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 offsite locations, you likely won’t need home business liability insurance.
Commercial Property Insurance
Commercial property insurance covers businesses for property damage due to certain covered events, such as fire, theft, vandalism, or extreme weather. Property needing coverage includes building, equipment, office furniture and inventory. If the business’ property is damaged or destroyed, the property insurance would help cover the cost of repair or replacement.
Who Needs Commercial Property Insurance
Home businesses that have assets that are needed for daily operation of the business 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 property of a business, especially if the property is not for personal use.
Examples of home-based business property that might need property insurance coverage for risks, such as fire or theft, include computers, printers, and inventory. An ecommerce business like an Amazon FBA business is a good example where this would apply. Also, businesses such as landscaping and handyman/repair services, which work away from the home but store their equipment in the home (e.g., the garage), may need commercial property coverage.
Who Doesn’t Need Commercial Property Insurance
Home-based businesses that don’t have high-value assets inside their home working space or stored off-site won’t 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 work wouldn’t need commercial coverage because their homeowners policy would cover it.
Errors & Omissions Insurance
Errors & omissions insurance, or E&O insurance, is professional liability insurance that protects professionals and service-oriented business owners against liability claims arising from their mistakes or negligence. E&O covers legal and defense costs 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 bodily harm or financial damage to a client, you would need E&O coverage in the event the client sues you for damages.
Here are examples of professionals that typically need E&O insurance:
- Accountants & Bookkeepers
- Legal Services
- Financial Advisors
- Computer Programmers
- Personal Trainers
- Business Consultants
- Real Estate Agents
Keep in mind that E&O insurance can’t be covered by a homeowners policy and that most E&O claims are not covered under general liability or commercial property insurance. Some home-based businesses may use a combination of a homeowners policy endorsement for liability and property coverage and E&O insurance to complete their insurance needs.
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 professions not needing errors and omissions coverage include writers, musicians, and teachers.
Workers compensation insurance is needed by about 10 percent of home-based businesses. It provides benefits to your employees in the event of work-related injury or illness. Workers comp coverage includes medical bills, wages from lost work time, and more. The cost of workers comp averages between $1.00 to $2.00 per $100 in employee wages.
Who Needs Workers Compensation
Most states require businesses with employees to have workers compensation. Some states require workers comp if you have just one employee, while other states require coverage if you have three or more. This requirement includes home businesses. 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 percent 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 number for required coverage, you don’t need workers compensation insurance. Also, in the case of employees who are also owners, workers comp is not required.
Homeowners Policy Endorsement
A homeowners policy endorsement is an extension of coverage added on to an existing homeowners insurance policy. This extension of coverage can be used specifically to protect a home business from claims arising from third-party bodily injury and property damage or damage to the business’ property. This endorsement may cost as little as $25 per month.
There are two primary types of homeowners policy endorsements you may need:
- Homeowners Liability Endorsement: Adds to the limits of liability on a homeowners policy for coverage in case clients or suppliers get hurt visiting your premises.
- Homeowners Property Endorsement: This is typically added to a homeowners policy to protect equipment, such as computers and printers.
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 per month. Some insurance companies will 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.
According to Tom Drennan, Partner, Dinsmore & Shohl, LLC:
“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.”
Who Doesn’t Need a Homeowners Policy Endorsement
Home businesses that need extensive liability and property coverage do not need a homeowners policy because they will buy separate commercial policies or a business owners policy (BOP) instead. For example, home businesses that have high client traffic, such as a beauty salon, will need more third-party liability protection than most homeowners policies will offer.
Home-Based Business Insurance Costs
|Commercial General Liability|
|Commercial Property Insurance|
|Professional Liability |
(Errors & Omissions)
|Homeowners Policy Endorsement||$25-$50 to increase existing policy by $2,500 to $5,000|
|Workers Compensation||$1.00 to $2.00 per $100 in employee wages in most states|
Most home-based businesses won’t need multiple insurance types and some businesses may get the coverage they need by simply adding a homeowners policy endorsement. For businesses that need broader coverage, a business owners policy (BOP) can be a smart choice. A BOP bundles general liability and property insurance into one cost-effective, single-premium package.
For example, many home-based businesses can get the coverage they need with commercial general liability and commercial property insurance. Typical costs for both might be $1,000 in premiums per year. But if all you need is to add $2,500 in business coverage to your homeowners policy for property insurance, it may cost as little as $25 to $50 per year.
Tips on Applying for Home-Based Business Insurance
Applying for home-based business insurance is similar in process as applying for other types of business insurance. However, there are a few key points to keep in mind that are unique to home businesses. For example, some home businesses may be able to add coverage to their homeowners policy while others will need to buy additional coverage.
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. Although insurance representatives can be good sources of information on covering a home-based business, it’s wise to have a good idea of what coverage types you might need before getting quotes.
Here are some quick checks on what coverage types you may need:
- If you have business-related guests coming to your home business or if you work with customers or vendors at their location, you’ll probably need general liability insurance.
- If you have $10,000 or more in business property, you will likely need commercial property insurance.
- If you have little to no contact with the public and only a few business assets, such as a computer and a printer, you may find sufficient coverage with a homeowners policy endorsement.
- If you have employees, you may be required to buy workers compensation insurance, depending the state where you do business.
- If you are in the business of providing advice to clients, such as an accountant, a financial planner, a personal trainer, or business consultant, you may need errors and omissions insurance.
- If you need multiple types of business insurance, including general liability and commercial property insurance, you should get a business owners policy (BOP), which will bundle coverage into one cost-effective package.
According to Jeff Somers, President of Insureon:
“The majority of homeowners and renters insurance policies specifically exclude coverage for any business use of the home. As a result, this means many home-based business owners may unknowingly lack liability protection for client injuries that occur in their home as well as damage to business property kept at home, such as printers, office furniture or inventory.”
2. Confirm What’s Covered on Your Homeowners Policy
Before shopping for commercial coverage, most home-based business owners are wise to check with the provider of their homeowners policy. Although most homeowners policies don’t cover business claims, most providers will 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 per month. But if you need to add $500,000 in liability coverage, you would likely need to buy a separate commercial liability policy. A smart way to confirm what’s covered and what’s not covered is to speak with the insurance provider on your homeowners policy.
Talk to your insurance provider about extending liability insurance and property insurance for your business, according to Brad Goldsberry, Farmers Insurance:
“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.”
3. Get Multiple Quotes
When shopping rates for home-based business insurance, be sure to get quotes from at least three different providers. This will enable 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 for 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. If you have questions not found here, be sure to ask them in our forum.
How do I know if I need home business insurance?
Generally, you need home-based business insurance if your homeowners policy will not cover your business or if add-on coverage, called a homeowners policy endorsement, is not sufficient to cover your business. For example, if you have business-related visitors coming to your home, you may need commercial general liability insurance.
Some questions to ask for determining your need for home-based business insurance include:
- Do customers or clients come to your home?
- Do you keep inventory or supplies in your home or at off-site job locations?
- Do you have employees working in or outside of your home?
- Do you maintain client or employee records on your computer?
If you answered “yes” to any of these questions, your homeowners policy may not provide appropriate coverage for your home-based business. Depending on the type of business you have, you may be at risk for claims from property damage, lawsuits from third-party injuries, employee injuries and more.
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?
The Internal Revenue Service allows home business owners to deduct the cost of premiums on most business insurance policies, such as general liability and commercial property insurance, from their taxes, according to IRS Publication 535. 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 would therefore not need commercial business insurance. The most important determining factor in this case is the wording in a homeowners policy.
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.
To make sure your coverage amount meets your insurance needs, reach out to AP Intego. Their team of nationally licensed agents will shop and compare policies to get you the best policy at the best price.