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If you work from home and don’t have this insurance, you could be at risk

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When Regina Mohr started her home-based business, Caliber Meetings and Events, she knew she needed insurance. “Luckily I have good relationships with all my clients,” Mohr said, “but if something were to happen, I don’t have a huge company to fall back on and a huge pocketbook.”

Being a meeting planner does not sound very risky, but Mohr points out she could be held liable if a drunk conventioneer were to damage a venue or if somebody were to trip overequipment that had been left out and get hurt. For situations like that, she knew she needed liability insurance, but she was not sure if she needed other kinds of insurance as well.

Fortunately, Mohr’s insurance agent, Mark Ahart of Ahart, Frinzi and Smith Insurance in Alexandria, asked her a series of questions. Did she have employees? No. Did she meet with clients in her home? No. And so on.

Why was he so adamant about determining the correct insurance needs of her home-based business? “There have been cases where homeowners insurance carriers have denied liability claims because it was a business claim rather than a homeowner’s claim,” he explained. That could leave you hanging out to dry and paying big bucks out of your own pocket. “It’s huge peace of mind, knowing that I am covered, if something should happen,” said Mohr, “especially given how litigious people are these days.”

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Even if you just work (for yourself) from home, rather than running a full fledged home-based business, you need insurance to protect yourself. Why? “You need to separate your business from your home,” Ahart said. “If you make a mistake in your professional life, you don’t want people to be able to come after your home.” Your homeowners insurance will not cover problems that come up because of your home-based business. Neither will a personal umbrella liability policy, which also excludes business-related problems.

So what type of insurance do you need if you work from home or have a home-based business? There are several types, depending on the details of your business.

Business general liability insurance

This can also be called just “commercial insurance” or “commercial liability insurance.” It is the foundational policy all business owners — home-based or not — should have. “You should always have a business insurance policy, regardless of what type of work you’re doing,” Ahart said. “It’s broader and covers more things.”

What it covers:

1. Bodily injury: This is often called “slip and fall” because that is a common type of claim. Example: If you meet with clients in your home and one of them slips and gets injured on your icy steps when coming to a meeting.

2. Property Damage: Example: If you run a housekeeping business from home and one of your cleaners accidentally knocks over a client’s rare antique vase.

3. Personal injury in advertising: This protects you in libel and slander cases. Example: If you advertise why your business is better than another business and that business sues you over inaccuracies in your ad.

What it costs: $250-$350 a year for a typical business.

Commercial property policy

This insurance covers business equipment you keep at home, which insurers call “business content.” If your only equipment is minor, like a computer and printer, your homeowners policy has a “sub-limit” that should cover it. Check the dollar value of this sub-limit to make sure.

What it covers: Business owners who own more elaborate, expensive equipment should have a commercial property policy. It protects you if that equipment is stolen or damaged. Example: A contractor who owns expensive tools or a photojournalist who owns expensive camera equipment would need a commercial property policy.

What it costs: $200-$300 a year. However, commercial property policies are usually bundled together with business general liability insurance into what is called a “business owner’s policy” or “BOP.” The two together typically range from $350-$500 a year.

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Incidental home business endorsement

This is a minor policy extension that can be attached to your homeowner’s or renter’s insurance policy. You should have it if you do not have the recommended business general liability policy and people come to your home as part of your business. Business general liability is far better and broader with higher limits, but this can help in narrow situations. If you do have business general liability, you do not need this.

What it covers: This is bodily injury coverage only, the “slip and fall” type. Example: This minor coverage could be appropriate for a psychologist who sees patients at home, since sitting and talking is a low-risk activity. (The psychologist would also need malpractice insurance. See the next category.)

What it costs: $25-$50 a year.

Errors and omissions insurance

If your job requires you to give advice that could be wrong, you need errors and omissions insurance. For some professions, such as doctors and lawyers, it is called malpractice insurance. It can also be called professional liability insurance.

What it covers: If the guidance you give turns out to be flawed and your customer or client is harmed because of it, this insurance protects you. Example: This insurance would cover a structural engineer who designs a deck supported by beams that are too weak, causing it to collapse.

What it costs: Once again, it depends on the type of work that you do. Errors and omissions insurance for a small consulting business might cost $500-$1,000 per year. For a profession where more harm could potentially occur — such as the engineer — it can cost a few thousand dollars a year.

Workers' compensation insurance

If you have employees who work for your home-based business, whether they come to your home to do their jobs or work elsewhere, you need workers’ compensation insurance. State laws vary widely on which businesses must carry workers’ compensation insurance but, regardless, you want this coverage. Here is why: Under workers’ compensation laws, you are liable for on-the-job injuries to your employees regardless of whether you did anything wrong. That means you are responsible for related medical bills and lost income for the rest of their lives. (If you also employ domestic workers, like nannies or housekeepers, you need a separate workers’ compensation policy for them, as I’ve written before.)

What it covers: This insurance protects you if your employees are injured while working, period. It does not matter where they are when they are injured; if they are working for you at the time, you are liable. Example: If you run a bakery from home and your employee gets in a car accident while delivering cookies, workers’ compensation will cover the medical bills and lost wages.

What it costs: The cost depends on the type of work you and your employees do. Worker’s comp insurance typically costs $300 to $1,000 for clerical workers, but can cost several thousand for, say, a contractor who employs roofers whose job is more dangerous.

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