Protecting your business when a home is your office

For many individuals, owning a home is often their largest asset. Protecting that investment with appropriate insurance is absolutely imperative. Whether it is a fire, a burst water pipe or even a burglary, there is protection in place to indemnify the household.

For an estimated 18.3 million households in the United States, home also doubles as their office. Home-based businesses are becoming exceeding popular throughout the United States and now account for over 12 percent of business done in the United States. That equates to roughly $427 billion in earnings.

Advantages to working from home include the freedom to work at your own availability, spending more time with your family and being your own boss. Additionally, home-based businesses tend to be relatively inexpensive to start up, with approximately 44 percent requiring less than $5,000 initial investment. Home startups are often more successful, too: roughly 70 percent of home-based businesses will thrive over a three-year period compared to just fewer than 30 percent of other business ventures.

As with your home, it's equally important to protect the business owner with the correct insurance. More than half of home-based business owners are currently underinsured or uninsured. What's the main reason for this lapse in risk management? The predominant answer: They thought their homeowners' policy covered their business as well.

Suggesting that your homeowners' policy will protect your home-based business is a very common misconception that, if left unattended, can lead to extensive personal out-of-pocket expenses for the business owner. While some homeowners' policies offer some sort of protection for business owners in the form of endorsements and/or riders, it usually covers no more than $2,500 in property loss.

Though some homeowners' policies may cover a limited amount of personal property loss, it does nothing to protect the business owner from any claims in the home that are business-related. For example, if a business owner hosted a client in his home and a claim were to transpire, the business owner would be held fully responsible for any expenses resulting from that claim. The liability coverage from the homeowners' policy does not cover any business related claims.

To adhere to the growing amount of home-based businesses, the insurance industry has responded by providing a number of insurance products designed specifically for the home office. One of the products is the "business owners' policy, " a package approach that generally includes business property insurance as well as general business liability insurance.

As previously mentioned, business liability insurance is a necessity for any home-based business. Liability insurance protects the business owner if the business is found liable for damages incurred by another's property; in 2010, the average home-based insurance claim exceeded $10,000. General liability coverage tends to be between $300,000 and $1 million depending on risk exposure, although the coverage can be increased if necessary.

The business owners' policy generally carries a minimum of $10,000 in business property protection. This includes your computer, fax machine, copier, furniture etc. that would otherwise be uncovered by the homeowners policy if a disaster were to happen. This coverage can be increased as well to adequately protect the business owner.

Depending on risk factors, the average home business owner can obtain $10,000 in business property insurance and $300,000 in general liability insurance for approximately $600 a year through a business owners' policy. Though many factors can change your premium, the cost associated is significantly less than the costs associated with an uncovered business claim.

Another coverage many home-based businesses should utilize is professional liability insurance. This pertains predominantly to businesses such as accountants, lawyers, consultants, etc. Professional liability insurance protects the business professional from any litigation or reimbursement as a result of a mistake made by the business. Even if you are a professional who is transitioning from a position with an office-based business to a new home-based business, you may still need to secure coverage that will be in place the moment the prior coverage lapses.

The final insurance product that many home-based business owners are beginning to secure is cyber liability insurance. Along with the influx of home-based businesses, there has been a significant increase in the amount of data storage and business that is done via the internet. Now while Internet-based business can be very advantageous for many home-based businesses, with it comes inherent, and often times significant, liability concerns.

For any business that is gathering personal information it is imperative to have some form of cyber liability insurance in place. This includes information such as personal phone number, address, email, date of birth, Social Security number etc. Something as simple as misplacing your business laptop which happens to store client information on it can lead to extensive litigation and indemnification claims that would otherwise be uncovered. Nowadays with such a propensity for Internet-based viruses, you can be vulnerable just by simply doing business on the internet. By securing cyber liability Insurance you are ensuring that you, your company and your clients will be indemnified should an unfortunate situation arise.

In all, for many business entrepreneurs the prospect of a home-based business can certainly be advantageous. With adequate and appropriate insurance a home-based business, along with the home itself, can be well protected.

For more information and specifics on your home-based business needs, contact your local insurance provider to discuss your options.

Ryan Krauser is a sales executive with Altus Insurance Group, which was recently added to Clark Insurance Solutions to provide commercial and personal property insurance. Contact him at ryan@altusnv.com or 828-7420.