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Your Home-Based Business Needs the Right Protection

5 min read

Your personal coverage won’t protect your business property. Find out how to fix this problem when you have a home-based business.

69% of U.S. entrepreneurs start their businesses at home. Online platforms give you an even greater chance to succeed without a physical storefront.

Still, Small Business Trends says 77% of small businesses are started with personal funds. You have a lot on the line, even if you work for yourself from your living room.

That’s why your home-based business needs the right protection! Find the best way to cover your property and profits.

Crossing the Line From Personal to Business

You might be thinking:

• “I work in the garage. I have homeowners insurance. I’m good, right?”
  
  
• “I use my truck for deliveries. It’s covered by my personal auto policy.”
  
  
• “I have a consulting business. Most of my meetings are online, but I see clients at my house. The only equipment I use is my laptop.”
  
  
• “I host product parties and sell leggings. My friends invite their friends. We drink wine and have a good time.”

Here’s how things look from an insurance perspective: personal policies are personal policies and business policies are business policies.

What that means for you:

• When you start using personal belongings for your business, they’re business items.
• You need business coverage if you run a home-based business.

Scenario: A Pothole Stalls a Furniture Empire

Taylor couldn’t take much more of the corporate world, so she created an exit plan. She launched a furniture business on the side and built a solid customer base.

As the income rolled in, Taylor’s passion grew into a full-time venture. She quit her corporate job and never looked back.

Now Taylor spends her days sawing, sanding, and painting in her garage. She puts the finishing touches on a maple dining set that needs to go out today.

Taylor loads the furniture into her truck, secures it, covers it, and leaves for the delivery. A few miles into the drive, the sky grows dark and overcast.

Taylor doesn’t see the huge pothole in the road. WHAM!

The truck bounces. Taylor pulls over and scrambles out to check for damage.

The passenger-side front tire is flat. The rim looks bent, and the steering alignment is probably shot.

Taylor takes a deep breath and checks on the dining set. The table slammed into the top of the truck bed and knocked off one of the legs.

What Could Taylor Have Done Differently?

Taylor only has personal insurance policies. That’s bad news.

She used her truck for a business delivery as she took business items to a customer. Her truck probably won’t be covered by her policies, and neither will the table.

Remember how insurance views these situations. When you start using personal items for a business, they become business items.

Before you say, “that’s not fair,” you should know the differences between a personal auto policy and a commercial auto policy.

A commercial auto policy factors in risks that come with transporting goods, equipment, and customers. A personal auto policy won’t account for these things.

Before she launched her home-based business, Taylor should’ve contacted her Pekin Insurance agent to discuss a business coverage plan.

What About All That Equipment?

Taylor thinks her homeowners coverage will protect the tools and materials she uses for her furniture.

Taylor’s work requires:

• Drills.
• Finishes.
• Hammers.
• Levels.
• Paint.
• Saws.
• Squares.
• Wood.

Home insurance isn’t designed for business risks that come from:

• Creating business goods.
• Storing intellectual property.
• Keeping customers’ sensitive documents on-premises.
• Having employees work in your home.

What Home-Based Businesses Need Protection?

The answer is, “almost all of them.”

You should have business insurance if you:

• Have non-family employees working for you at the house.
• Use your own property for business purposes.
• See customers or vendors at home.
• Provide services for a cost.

These rules apply to:

• Hosting LuLaRoe, Pampered Chef, or Beachbody parties.
• Giving clients financial advice onsite.
• Styling hair.
• Repairing electronics.
• Providing home daycare.
• Most home-based business models you can think of.

Six Business Coverages You Need to Know

1. Commercial auto coverage is ideal for home-based businesses that use delivery vans, utility trucks, refrigerated vehicles, private passenger vehicles, and more.
   
   
2. Business property coverage can help protect tools, inventory, computers, and working space.
   
   
3. Commercial general liability offers coverage when someone gets injured on your property.
   
   
4. Workers Compensation covers medical costs for many work-related accidents and illnesses.
   
   
5. Professional liability coverage (also known as errors and omissions) could help when a client suffers a financial loss and blames it on a mistake you made or a service you didn’t perform.
   
   
6. A commercial umbrella policy activates after you’ve exceeded the limits of other policies. It's designed to protect your assets and future earnings when a lawsuit or accident threatens the survival of your business.

Do you need a coverage plan for your home-based business? Look no further than your local, licensed Pekin Insurance agent!