There are over 30,000,000 home based businesses in the United States.1 These people are brave, creative, and doers that make a difference in the lives around us. Often they are leaders and engage life in a way most of us just do not. They transform industries, communities, and inspire many of us to pursue life to the fullest.
We admire and applaud them because they do what they love and have freedoms that many of us just do not have. Yet they also take on immense risk to pursue their passions.
60 percent of home based businesses do not have insurance.2 Of these businesses many think they are covered on their homeowners or personal auto insurance. While naturally risk tolerant many of these businesses needlessly accept risk and/or may not fully realize some of the legal risks they have as they run their ventures.
Home based business can be held responsible for significant financial loss.
Some common phrases we’ve heard home based businesses say…
“If something happens I’ll just hire a lawyer.”
“I’m a very careful driver so that won’t happen to me.”
“My product can’t injure anyone.”
“I’ll just shut down my business.”
“I’m not worried about losing my inventory.”
Some of these statements are certainly acceptable and some are misguided, yet when the unexpected happens their responsibilities are often greater than they thought.
Understand what’s at stake. The goal is your continued success.
If you are running a home based business here are some considerations:
- Business property – Business stock or equipment
- Your homeowners insurance may only cover a small portion, if any.
- Delivery of goods – Driving to a job-site or delivering product
- Auto insurance must be specifically crafted to cover this.
- Business premises exposure – A client injured at your home
- Customers injure themselves often – they fall down stairs, slip on ice, etc.
- Products liability – Your product causes injury, illness, or other bodily injury or property damage
- Ever seen a video of a child with an eraser stuck up their nose? Adults are worse. Even their mishandling of your product can come back to haunt you.
- Employee injury – Be aware of workers compensation laws and regulations
- With a few exceptions workers compensation insurance is required by law
- Contractor hustle – Side hustle or full time gig
- Let’s say you have an electrical side hustle and you are the alleged cause of a fire that burns down a house. The homeowners insurance company can lawyer up and demand reimbursement.
- Professional Services – Bookkeepers, consultants, digital experts, etc
- Your alleged or actual error in your professional work may cause financial loss to a client and they can seek recourse.
Whether you run a formal or informal business out of your home you are subject to legal and financial risk in which you are responsible. Even if you are incorporated, LLC, or acting as a sole proprietor there are specific business related exclusions in both home and auto policies that must be accounted for. Some personal lines insurance carriers have specific carve-backs available for certain situations so be sure to talk with your agent about your business.
Jeremy Hyde | Colligan & Company
Small Business Insurance | Home Based Business Insurance | Entrepreneur