Should you insure your small home business as an owner?
As a small business owner, you know that your business is vitally important to your family’s financial future. As a result, you may worry about the potential cost of an accident or injury at your place of business. Fortunately, a small business owner’s package policy can provide you with protection against many of the perils that threaten your business assets. For a modest premium, your package policy can help protect you from several different types of losses.
WHY DO YOU NEED A HOME-BASED BUSINESS INSURANCE?
These policies are typically written with the small business owner in mind. For a relatively modest premium, your package policy can help protect you from several different types of losses. In most cases, a small business insurance package will include homeowners insurance and commercial property insurance for business property such as office equipment and inventory. It might also cover you if you are sued because of injuries sustained on your property.
TYPES OF COVERAGE
A small business insurance package typically consists of three types of coverage. First, they can protect their company from liabilities via endorsements to a homeowner’s policy, an in-home business insurance policy, or a business owner’s package plan. Second, the size and nature of the company and the cost of insurance determine which option is optimum.
- HOMEOWNERS POLICY ENDORSEMENT
A small business insurance package usually consists of a homeowners policy endorsement and commercial property coverage. This type of package is ideal for companies that need liability protection but do not have enough in-house equipment or inventory to justify an in-home business insurance policy. With a modification to a homeowners policy, the small business owner can add coverage for in-home equipment. It is an inexpensive way to extend coverage to computers and other office machines vital to a small business’s success yet difficult or impossible to replace quickly.
- IN-HOME BUSINESS POLICY
An in-home business insurance policy is written with the small office or store owner in mind. It protects equipment, inventory, and other business property that are integral to your operation. In addition, if you operate out of your home, it may protect you from liability claims that stem from alleged defects on your property. An endorsement can be attached to a homeowners policy to provide coverage, or an in-home business insurance policy can be purchased. However, this policy offers you limited coverage as it is relatively cheaper.
- BUSINESS OWNERS POLICY
When a business has high-value equipment and inventory, it needs an insurance policy designed specifically for these needs. A Business Owners Policy (BOP) is a package plan that provides the liability protection you need and property coverage for your business assets. For example, if someone slips on your shop floor and gets hurt, your commercial property insurance would pay for damages. Likewise, if you negligently injure someone in your store, a commercial general liability endorsement part of the BOP would cover those claims.
ASPECTS TO TAKE INTO ACCOUNT
- ADDITIONAL INSURANCE
Re-examine your coverage as your business expands, and your needs change. For example, you may want to add a business income or business interruption endorsement. Also, you might want to upgrade your coverage as your assets increase in value.
- ZONING LAWS
Generally, coverage for business losses is not triggered when a property is damaged by fire or other disasters excluded from your policy. However, there are exceptions. For example, your policy may not protect you if the damage occurs in a store that violates local ordinances. Find out about the zoning laws in your area before purchasing insurance.
- LICENSES AND PERMITS
If you operate a business out of your home, ensure that your homeowners’ insurance includes your activity’s proper licenses and permits. Your policy will probably not provide coverage if you violate local ordinances by operating a business without required licenses and permits.
If you operate your business from a homeowners policy, it may be less expensive to take a tax deduction for a part of the premiums. Talk to your insurance agent or financial advisor about this option.
- COMMERCIAL VEHICLES
Vehicles acquired for business use may be covered under the standard homeowners’ policy endorsement, which provides coverage for an additional vehicle or a commercial auto insurance policy.
Business owners need to consider several factors when choosing a business insurance policy. These include:
- The type and amount of coverage that is appropriate for your business.
- Which endorsements, if any, should be attached to your homeowners’ insurance policy.
- How to best provide proof of loss or proof of liability to get paid by your carrier.
- What types of taxes or exemptions may apply.
If your small business has valuable assets that need to be insured, seek professional advice to know of options available to you. This will help you choose a policy that is best suited and tailored to your needs. Make sure you have adequate coverage to help protect your small business from any unexpected liabilities.