Home Business Insurance

Does homeowners insurance cover a home business?

In most cases, a standard homeowners insurance policy is highly unlikely to provide adequate coverage for your home office or other home business-related activities. Most home policies provide only $2,500 of protection for business equipment on-premises and $500 off-premises. Furthermore, they often provide no liability coverage for business-related actions, leaving many home businesses without proper coverage. If you operate a home office or run a small business from your home, it’s imperative you do your research to find an insurance policy that protects you.

While insurance companies' offerings vary widely, home-based small business owners usually have a few options when it comes to insurance. Read on to see what coverage option is best-suited to protect you and your assets. 

Business property insurance basics — table of contents

1. Is home business insurance required?
2. Permitted Incidental Occupancies endorsement
3. Home Business endorsement
4. What is a business owners policy?
5. Homeowners insurance for home-based employees
6. What is business pursuits coverage?
7. Flood insurance for a home business
8. Commercial auto insurance

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.

Permitted Incidental Occupancies endorsement

This is an especially helpful addition to a homeowners insurance policy for professionals who keep a secondary home office. It can be a great option for freelancers or someone who works from home on a fairly regular basis.

Such professions typically include:

• Contractors
• Attorneys
• Accountants
• Real estate agents
• Bookkeepers
• Writers/editors

A Permitted Incidental Occupancies endorsement is ideal if your home office is separate from your primary office. Business activity should also ideally be limited to general tasks such as phone calls, record keeping, or paperwork. Public access should be limited. Other home business operators might consider such an endorsement, provided business is conducted at the location on a limited or part-time basis. These occupations include: 

• Teachers offering in-home tutoring or music lessons
• Sewing, tailoring, or alteration businesses
• Cake decoration
• Photography studios
• Beauty parlor/barber shops with one or two chairs and no other employees
• Pet grooming services
• Sellers of cosmetics, crafts, or jewelry

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. 

What's covered by the Permitted Incidental Occupancies endorsement? 

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 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. 

What isn’t covered by Permitted Incidental Occupancies insurance?

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

Home Business endorsement

This endorsement is a bit more robust than the Permitted Incidental Occupancies add-on. Instead of simply providing coverage for occasional business activity, the Home Business endorsement covers a wider variety of home-based business activities. While still falling short of a true business owners policy (BOP), a Home Business endorsement will suit the needs of many at-home businesses. 

To be eligible for a Home Business endorsement, your business must: 

• Generate less than $250,000 per year
• Be owned by the named insured on the homeowners policy
• Operate primarily from the residence covered in the policy
• Not produce or distribute food or personal care items (national brands like Avon or Mary Kay are allowed)

What types of businesses are covered by a home business insurance endorsement?

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.

What is covered by a Home Business insurance endorsement?

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. 

What is not covered by a Home Business endorsement?

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. 

Other home-based business insurance endorsements

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. Also, the business cannot be in one of the following areas:

• Manufacturing
• Banking
• Hospitality services like bars or pubs
• Self-storage for cars
• Auto repair
• Amusement parks

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.

Nationwide Work from Home insurance

Insurance companies have also become privy to the needs of work-from-home employees. For example, Nationwide now offers a Work from Home insurance bundle comprising four coverages catering to part-time and full-time remote workers. Nationwide's WFH insurance includes the following:

• Property insurance: Since your home is now also your office, your homeowners coverage will be adjusted to safeguard your workspace and its contents.
• Telematics-based car insurance: If you seldom drive because you no longer have a daily commute, telematics auto insurance can save you more money than a traditional car insurance policy. Nationwide's SmartRide® telematics program uses a mobile app and in-car plugin device to monitor the way you drive. This data is then used to price your premium based on your driving habits.
• Identity theft protection: The security of your personal data can be more at risk if you're spending more time online. This coverage will provide assistance if you're ever a victim of identity theft.
• Pet insurance: It's no secret that vet expenses for a pet can be prohibitively expensive. Pet insurance is designed to help pay for some of these costs.

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. 

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, call 888-444-2833.

Sources:

• International Risk Management Institute: Insuring the home-based business
• Insurance Information Institute: Insuring your home-based business
• Permitted Incidental Occupancy Endorsement
• Small Business Statistics