Home-Office Insurance Needs

How to Manage Liability at a Sensible Cost

Home-Office Insurance Needs
January 9, 2014

If you’ve decided to work from home and/or start a small business, and you’ve converted that spare bedroom into a home office, you may be wondering if your current homeowner’s insurance will automatically protect you in case your office equipment is stolen or destroyed. You may also want to know if you’ll be covered for the financial loss if you are unable to work from your home office for a considerable amount of time.

To answer these questions, let’s take a closer look at what protection you probably have right now and what additional protection you might need. . . .

You might be surprised to learn that between 50% and 60% of people who work from a home office do so without adequate insurance protection, because they wrongfully assumed their homeowner’s insurance policy will cover any damage to office equipment (or financial loss due to lack of productivity) should the unforeseen happen.

Homeowner’s Insurance Does Not Cover Much

Let’s look at the realities of most homeowner’s insurance policies when it comes to the protection offered to you and your home office.

Homeowner’s insurance:

  • Does not cover business liability
  • Does not cover loss of business due to cyber crime
  • Does not cover financial loss due to business interruptions
  • Does not cover loss of important business documents

Furthermore, the typical homeowner’s policy is often limited to $2,500 worth of coverage for damage to office equipment when it occurs in the home (e.g., an electrical surge burns out your computer), and only $500 worth of coverage when it occurs away from home (e.g., your laptop is stolen from your car).

So, what are the best ways to protect yourself and your home office against the unexpected? Here are a few popular insurance plans you may want to consider for your own protection and peace of mind.

    Supplemental homeowner’s insurance

    One of the most practical forms of home-office or home-based business insurance is a simple add-on to your current homeowner's or renter's coverage. Also known as a rider, the price of this supplemental insurance coverage can be as low as $100 per year, but can provide enough additional protection to cover your expenses should your home office become damaged due to fire, theft or other unforeseen disruption.

    Supplemental homeowner’s insurance may cover the loss of computer equipment and office furniture, but it may not offer adequate protection if a client or delivery person is injured on a visit to your home office. For that, you may need in-home business coverage.

    Business owner’s insurance

    An in-home business insurance policy designed to cover injury or theft that can occur in a small home office where the occasional client or delivery person conducts business with you. Insurance rates for business owner’s insurance depend on the state in which you do business, the type of business you conduct, and if you employ additional help. The price for coverage can be as low as $500 per year or upward of $500 per month, depending on the liability coverage you seek.

    Home-office insurance/home-business insurance

    Often part of an insurance package including home and auto coverage, home-office insurance is an extension of the business owner’s policy, and is designed to cover the loss or destruction of business property; the loss of important documents and data; liability insurance and higher covered limits.

    Business interruption insurance

    This type of insurance protects against lost income if the office is damaged or destroyed by a natural disaster (such as a fire or hurricane) and cannot be utilized for business purposes. Typically, a significant portion of profits that would otherwise have been earned will be paid to the policyholder for a set term.

Before seeking any of these additional forms of insurance, speak with your insurance agent and discuss how you plan to use your home office, what the laws are in your state with regard to having a home office, and your liability in case of injury to anyone who should visit your home or office while conducting business. Also, determine the amount of money you would need to replace all of the equipment used in your home office (i.e., computers, printers, fax machines, scanners, telephones, digital backup devices, etc.) and make sure you have adequate coverage to repurchase everything if the situation should arise.

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