Based on reports from the National Bureau of Labor Statistics, approximately 21 million people work at home and two-thirds of them are self-employed. Unfortunately, many of these individuals lack proper insurance coverage for their business because they are under the impression that their homeowners policy covers them in the event of an accident or tragedy. In fact, homeowners policies generally cover only up to $2,500 of on site damages and $250 off site. The Independent Insurance Agents of America (IIAA) estimates that close to 40 percent of at home workers do not have adequate coverage for their business as a result.
There are three types of business insurance:
• BOP or Business Owners Package Policy
• Endorsements to your existing homeowners policy
• In-home business policy
Business Owners Package Policy (BOP)
Known by insiders as a BOP, a business owners package is a deal designed to provide an easy to implement insurance policy for small and provincial business owners, especially for home-based businesses that manufacture items outside the office. The BOP form covers businesses with gross income of up to $3 million, with premises as large as 25,000 square feet. This provides flexibility as your home business grows, while offering additional amenities at a significantly better rate than general business policies. The BOP is approved for use in 39 states and the District of Columbia and covers property, equipment, income loss, additional expenses and liability.
For example, if you use your basement or home as a warehouse, the BOP policy covers all products and equipment in the event they were damaged in a house fire. However, the policy may not be applicable to specific types of coverage, such as small restaurants or environmental companies. Some businesses may require expanded insurance to cover items not included in the general package. To address some of these concerns, the BOP was recently revised to provide coverage to independent contractors, small restaurant operations, dry cleaners, and convenience stores.
Endorsement Based Policy
Rather than purchase an additional business insurance policy, you have the option of expanding your existing homeowners policy via an endorsement. For a nominal monthly fee, in some cases you can double your policy coverage to $5,000. For an extremely small business, an endorsement is more ideal than the broader BOP coverage. Some insurance companies have even gone so far as to offer endorsements that integrate limited business liability and property coverage. Generally, endorsements are only available to businesses that make less than $5000 in gross sales. Endorsements are available in all 50 states.
In-Home Business Policy
As more and more individuals choose to create home-based business, the insurance industry has responded by creating more flexible and dynamic policies. The In-Home Business policy is designed to provide adequate coverage at an inexpensive price. For roughly about $200 annually you can insure your business for up to $10,000, with general liability coverage included. For those in need of higher coverage, the In-Home Business policy can be expanded to provide anywhere from $300,000 to $1 million in liability coverage. While less comprehensive than a BOP policy, the In-Home Business Policy also covers a range of items including income loss and ongoing expenses.
In fact, if your business were to be shut down due to damages to your home, the in-home business policy will cover income losses and payroll for up to an entire year. Moreover, any valuables such as important documents, accounts receivable, off-site property and equipment will be covered.