Opening a small business can be both exciting and frightening. Even if you start small, the liabilities may feel greater when it’s your time and you hard-worked money on the line. But that doesn’t stop us from opening our home-based businesses, as the U.S Small Business Administration says.
However, setting up your headquarters in your home does not mean your homeowner policy will cover your operation. A typical homeowner policy will offer you about $2.5000 of coverage to cover your equipment and all the essentials of a business, yet it won’t cover or offer you liability protection for lost income or data. That’s why home-based businesses should create a detailed business plan that includes having the right type and amount of coverage.
What does small business insurance involve?
Small business insurance refers to common insurance policies designed to protect small business owners from perils they may encounter, like property damage, physical injury, negligence, or phishing. Common insurance types for small businesses include:
- Professional Liability Insurance – against lawsuits and claims alleging misconduct, negligence, or failure to deliver a service as pledged.
- Commercial General Liability Insurance – against costs associates with lawsuits and claims charging for property damage or bodily injury resulting from your business operations.
- Product Liability Insurance – against suits or claims for property damage or a third-party injury resulting from a product you manufacture or sell.
- Cyber Liability Insurance – against phishing and other cybercrimes that may result in compromised data.
Do I need insurance for my home-based business?
It’s not mandatory to hold small business insurance in order to operate your business; however, if you operate a home-based business like a bakery, for instance, the chance is you might need a bakery insurance. That’s very similar to insuring a small business or restaurant and a very critical part of starting your business.
As a critical part of your risk management strategy, small business insurance will cover costs associated with lawsuits that may otherwise jeopardize your business.
What does small business insurance cover?
Typically, liability insurance offers coverage against lawsuits and claims filed by a third party for injuries, negligence, or property damage. Note that your specific policy will vary depending on your niche and operations.
How much does the lability coverage cost?
Factors like location, industry, claims history, and experience will determine your small business liability coverage’s cost. You can expect spending $650 on an annual commercial general liability coverage with a $2M limit for a small-to-medium-sized firm.
Do I still need coverage for my home-based online business?
Some home insurance policies may cover equipment used for work, however, signing for a small business insurance policy will cover what your home insurance coverage can’t. For instance, if a customer insures themselves in your home office or is unsatisfied with the service you offer, your small business coverage will handle any associated costs.
Running a small business can be daunting, but your insurance doesn’t have to be. It’s enough that you have to worry about keeping your business up and running; that’s why we recommend you filling for home-based business insurance even for the simplest business pursuits.