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Many clever entrepreneurs start a home-based business to increase income, while at the same time reduce the risk of capital investment needed to start a new enterprise. Using a spare room in a house for business efforts is usually less expensive than renting out an office space for the same operations.
Surprisingly, a study by the Independent Insurance Agents & Brokers of America found that 40% of business owners operating a home-based business falsely believe that they are adequately insured. Contrary to this popular misconception, usually regular homeowner’s insurance does not cover business uses of a home or part of a home. Regular home insurance may only provide limited or no coverage for equipment.
A common, yet surprising, example of this concern is that when a person rents out a room in a home to a third-party, the items in the room are usually not covered by the homeowner’s insurance policy. The reason this happens is renting a room means that the function of room changes from personal use to commercial use.
Having a home-based business is similar. Even if you do not pay rent for the room(s) used; each room’s function changes from personal use to commercial use.
Considerations for Home-Based Businesses
Many home-based businesses operate as consultants and freelancers. When in-person client contact is minimal, the insurance requirements for a home-based business are modest.
Foot-Traffic
One thing to consider, when you consult with your insurance agent at McCormick Insurance Inc., serving Pembroke Pines, FL, and the surrounding area, is the amount of foot-traffic of clients or customers coming to the home. If people come to the home they need to be protected by insurance from accidents that might occur.
Equipment and Vehicles
Additionally, you will want coverage for any business equipment used in the home-based business. Moreover, if you use a personal vehicle for business purposes, there are special insurance requirements for your vehicle in order to have adequate coverage.
Work Down Outside of the Home
If some portion of the work is done in the home and another portion is done outside of the home, consider a business owner’s insurance policy. It can take those different types of work into account.
Consult with your insurance agent at McCormick Insurance Inc., serving Pembroke Pines, FL to be sure you have adequate insurance coverage for your home-based business.