Home Business Insurance
- Standard homeowners insurance usually doesn’t cover business equipment or liability for home-based work
- A home-based business endorsement or separate business policy may be needed for proper protection
- Coverage can include business equipment, inventory, and liability if a client or delivery person is injured on your property
Does homeowners insurance cover a home business?
Not really. Standard homeowners insurance offers very limited protection for business use—typically up to $2,500 for business equipment at home and just $500 if it’s off-site. Even more importantly, it usually doesn’t include liability coverage for business activities, meaning you could be personally responsible if a client slips in your home office or a product you sell causes harm.
If you run a business from home, you’ll likely need extra protection beyond your homeowners policy. The good news: there are several coverage options designed specifically for home-based businesses. Let’s look at which one fits your needs.
Small Business Insurance
Make sure that your business assets are protected by reading our guide to finding the right small business coverage for your needs.
Do you need a home business insurance policy?
The type of home-based business property insurance you need depends on the size and nature of your operation. Many insurers specifically define what constitutes an eligible business — even if it doesn’t generate a profit. States have their own regulations concerning home business eligibility and coverage availability.
One option is a home business policy in the form of an endorsement — or rider — added to a standard homeowners insurance policy. These add-ons come in a few shapes and sizes.
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Permitted Incidental Occupancies endorsement
A Permitted Incidental Occupancies endorsement is a small add-on to your homeowners insurance that provides limited coverage for a low-risk home business. It’s designed for people who use part of their home for simple business activities—like phone calls, paperwork or virtual meetings—and don’t have many (or any) customers visiting the property. This endorsement is ideal if your business is part-time, low-risk and doesn’t rely on heavy equipment or inventory.
It’s commonly used by people such as:
-
Freelancers and professionals who work from home part-time
Contractors, attorneys, accountants, bookkeepers, real estate agents, writers/editors -
Home-based side businesses with minimal foot traffic
Tutors, music teachers, sewing or alterations, cake decorators, small photography setups, one-chair beauty or barber services, pet groomers, sellers of crafts or cosmetics
This option provides a little extra protection without needing a full business insurance policy.
If the business is conducted in a building separate from the primary dwelling — such as an unattached garage — there is likely to be an extra charge. Some insurance companies may even refuse to cover it unless a further endorsement is added.
This endorsement covers limited business activity taking place in the primary dwelling or, in some cases, “other structures,” such as a free-standing garage or other unattached building on your property. Furthermore, it provides coverage for any business property. Some home insurance companies may offer an endorsement to increase the limits of your business property coverage. For an added cost, you can increase the liability limits for business property from $2,500 to as much as $10,000. Also, some insurance companies may allow you to add homeowners liability coverage for added coverage, though this isn’t always possible.
Loss of income is not covered by this endorsement, nor are liability or medical payments. Some businesses are not eligible. The following types of businesses may not be covered:
- Auto mechanics
- Bakeries
- Home daycare
- Repair shops
- Health-related services
- Caterers
- Retail shops
Business Owners Policy Coverage Guide
A business owners policy (BOP) can provide general liability and property coverage in one convenient package. Find out if it's enough coverage for your small business with our handy guide.
Home Business endorsement
A Home Business endorsement offers more coverage than a Permitted Incidental Occupancies add-on. It’s designed for people who run a more active business from home but still don’t need a full Business Owners Policy (BOP). This endorsement can cover a wider range of business activities, equipment and liability.
To qualify, your business must:
- Earn less than $250,000 per year
- Be owned by the person named on the homeowners policy
- Operate mainly from your insured home
- Not make or sell food or personal care products (big brands like Avon or Mary Kay are okay)
Four primary business types are covered by a home business insurance endorsement, including:
- Crafts: This extends to the sales of craft-items produced in homes, such as quilts.
- Office: This category includes those who do administrative or clerical tasks such as answering phones or writing.
- Sales: This category includes sales of non-craft products such as cosmetics or jewelry.
- Service: This category extends to those who offer a service such as bike repair or dog-sitting.
Businesses eligible for this option are by and large the same as the previous endorsement. However, a Home Business endorsement applies to home-based workplaces with as many as three employees. Unlike a Permitted Incidental Occupancies endorsement, a Home Business endorsement provides personal liability, medical payments, business income, extra expense, and business equipment protection.
While the home business endorsement furnishes more coverage, it has its limitations. For one thing, the narrow scope of eligible businesses rules this coverage out for many. If the home office doesn’t meet the criteria listed above, a commercial policy is likely the only viable option. Furthermore, theft by employees is excluded, as are other dishonest acts. This endorsement provides no commercial liability or professional liability coverage, the latter of which is especially helpful for those who regularly give advice, such as lawyers or financial advisors.
As with the permitted incidental occupancies endorsement above, daycare insurance coverage is also not included — nor are lawn or gardening services.
A handful of other endorsements can be added to the home business endorsement to provide critical coverage.
- Valuable papers and records: Expands protection of important documents and records in the policyholder’s care.
- Loss payable provisions: Provides protection for property in which other entities have vested interest, such as financed business equipment. Should equipment be lost, damaged, or stolen, the lender would be covered.
- Additional insured — vendors: Extends coverage to those who distribute products directly related to the business activity.
What is a business owners policy in insurance?
The business owners policy (BOP) is an option for some businesses that are ineligible for home business endorsements. It provides property and general liability insurance coverage. Property coverage entails protection for business income, important records or documents, and extra expenses. The liability coverage extends to personal injury and advertising injury, though it does not include professional liability coverage.
To be eligible, your home business must meet certain criteria, including operating in an area that is less than 25,000 square feet and generating less than $3 million in revenue.[1]
Homeowners insurance for home-based employees
Working remotely is a growing trend these days, especially among tech companies. Remote workers are very often covered by their employer's business insurance, though this can depend on the company and their insurance policy. Typically, remote employees are covered for damage to business equipment such as an employer-provided laptop or other technology used for business purposes.
Also, if your position requires the use of confidential data, you are often covered in the event of data loss or a cybersecurity breach. Furthermore, if you are expected to drive as a function of your work-from-home duties, it's likely that your employer's insurance would to your vehicle when needed for business use.
Keep in mind that each employer will have its own guidelines and expectations. If you have any questions about what is covered under your employer's business insurance policy, it's best to contact your human resources department to find out more.
Business pursuits coverage
Business pursuits insurance coverage is a form of professional liability coverage that can often be added to a homeowners policy. It is different from a home business policy in that it provides liability protection against damages that come about through all business activities. To be eligible for this coverage, you cannot be the sole proprietor of the business or even a partner. Business pursuits coverage is a particularly useful endorsement for clerical workers and teachers.[2]
Flood insurance for your home business
Just as a standard homeowners policy won't cover damage from floods, nor will a policy for your home business. Flooding is the most common natural disaster in the United States, making it a huge concern for both home and business owners alike. Luckily, there are options that allow you to stay protected.
Most flood insurance policies are written by the National Flood Insurance Program (NFIP), though more and more private companies are entering the space with greater benefits for business owners. The Zebra partners with Neptune Insurance to provide coverage that is similar to an NFIP plan, but with extra perks and options specifically for those with commercial needs.
Neptune flood insurance allows for larger coverage limits than an NFIP plan and also offers up to $25,000 in business interruption coverage ($500 per day for up to 50 days). Get a quote today from Neptune Flood Insurance.
Business insurance for your vehicle
If your vehicle is used in any part of your business, it's likely that you will need a commercial auto policy to be properly covered. These policies provide many of the same types of coverage as a standard auto policy, but the coverage is extended to your business endeavors.
Get started by receiving a commercial auto insurance quote from our trusted partner, Progressive.
Insuring a home-based business: considerations and tips
Home business owners have a lot to consider when searching for a policy. Questions will arise about coverage types, cost, and whether or not your home policy is tax-deductible. Ultimately, your business needs will determine the type of policy you get. If you are generating revenue approaching $250,000 annually or planning on hiring a number of employees, consider a commercial insurance policy that might meet your needs more fully. If you operate a dedicated business vehicle, you should similarly seek out a commercial auto policy.
Each insurance company has different rules and regulations regarding home business endorsements. To get a better picture of what type of insurance coverage is best for your home business or office, reach out to one of our knowledgable agents for assistance.
Insider knowledge, trusted guidance
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Home business insurance FAQs:
Insuring your home-based business. III
Insuring the Home-Based Business—Part 3. International Risk Management Institute:
About The Zebra
The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.
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