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Important Question:

What's the Scope of Your Business

Some home-based businesses don't need much insurance beyond a homeowner's policy, particularly those businesses that have minimal equipment, don't have visitors, don't often visit clients or offer fairly straightforward products. It is possible to add coverage to your homeowner's policy for your business.

Consumer TIP: Often, for as little as $14 a year, you can double the limit of coverage for business equipment from $2,500 to $5,000.

* Note. But be aware that these additional coverages, known as endorsements, don't protect you if you are sued as a result of your business activities. Also, the endorsements usually don't cover income lost. Some insurance professionals strongly believe that business related endorsements to homeowner's policies aren't a good idea for any home-based operation.

One fairly inexpensive option for home-based business owners is a home office policy, also known as an in-home business policy. The policy provides the standard coverages for homeowners including fire, theft and personal liability as well as coverages for business property, commercial liability and loss of income.

Consumer TIP: Often, for about $200 a year, you can purchase a policy that offers $10,000 of coverage for business property. Also, you can buy business liability coverage with limits of $300,000 to $1 million. (If this sounds like a lot of coverage, it really isn't. Most people with any significant amount of assets carry liability limits of at least $300,000 on their personal auto policies.)

In addition, the home office/in-home business policy provides some coverage for loss of valuable papers and records, accounts receivable and business property not located in your home. Also, you can buy additional coverage for equipment breakdown and theft.

* Note. While the home office policy offers adequate coverage for many in-home businesses, it is not the best option, or even a prudent option, if you conduct a large amount of your business away from your home.

The most extensive coverage for home-based businesses is available in a business owner's policy, which insurance people call a BOP. If you stock a lot of inventory, manufacture fairly complex products or provide professional services where there is a significant risk of being sued by disgruntled customers, a BOP probably is the best option.

Depending on the limits of coverage you need for property and liability, BOPs can cost anywhere from $150 to more than $1,000 annually.

Consumer TIP: No matter what type of coverage you choose whether it's an endorsement to your homeowner's policy, a home office/in-home business policy or a BOP you and your agent should evaluate on a regular basis, at least once a year, whether your insurance is adequate. As your business grows, it's quite possible it will outgrow your insurance coverage. The bigger your business, the higher limits of property and liability coverage you need.

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