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                     Insurance Information Institute

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                       Insuring Your Home Business

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       An estimated 12 million Americans operate a full or part-time

     business from their homes, and that number keeps growing.

     Although savvy and creative in their own specialties, these

     entrepreneurs at times seem bewildered about how to insure their

     business against theft, fire and liability.  Some believe that

     their homeowners policies cover all their home business insurance

     needs.  As a result, a lot of these home business owners are

     uninsured.  This brochure contains some guidelines to help owners

     of home businesses to properly insure their business.

     

     

     Property and Liability Insurance

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       Businessowners need both property insurance in case they're

     robbed or a fire breaks out in their company's "headquarters" and

     destroys equipment and inventory, and liability insurance in case

     someone gets hurt using their product or services or falls down

     the stairs when coming to see them.

     

       The first tip for businessowners is:  Don't assume that your

     homeowners policy covers your home business.  It may, but

     probably only to a maximum of $2,500 for business equipment in

     the home and $250 away from the premises.  It usually doesn't

     cover business-related liability, for example, if a customer or

     supplier is injured on your property, at all.  Your homeowners

     policy also doesn't insure your inability to collect your

     accounts receivable if your business records are damaged, and it

     won't replace lost income if you cannot operate your business due

     to damage to your home.

     

       There are three ways you can buy the home business insurance

     coverage you need:

     

         1) Depending on the type of business you operate, you may

     be able to add an endorsement to your existing homeowners policy.

     Some insurance companies offer a home day care coverage

     endorsement for people who operate a home day care service for

     pay in their home.  Some companies will offer property and

     liability insurance for "incidental" businesses operated from

     your home.  However, each company may define incidental

     differently.  For example, some companies consider an incidental

     business one that grosses less than $5,000 per year.

     

         2) You can buy several individual business insurance

     policies to provide the various coverages you need, such as

     business property, general liability and business income

     insurance.

     

         3) Or you can buy a businessowners package policy designed

     for smaller businesses, which combines the necessary property and

     liability insurance coverages you need in a single policy.

     

       Because home businesses keep popping up all over the

     country, some insurance companies have begun to offer what

     amounts to a mini-businessowners package policy specifically for

     home businesses.  Some of these policies cover the loss or

     destruction of business property on or off premises;  the loss of

     valuable papers and important business information;  personal

     injury and advertising liability;  accounts receivable up to

     $10,000;  money lost on premises up to $5,000 and off premises up

     to $2,000.

     

       The companies that offer these polices often require that you

     purchase your homeowners and auto policies from them.  With

     those policies in place, your home business policy extends the

     amount of personal property and liability coverage you have on

     your home to your business.  And if a fire or storm makes running

     your business impossible, it'll cover expenses and lost income

     for up to a year.

     

       These package policies cut the possibility of gaps and

     duplications in coverage.  But, unfortunately, they're not

     approved yet for sale in all the states.  The important point is

     to talk with an insurance professional and get the most

     appropriate coverage for your home business that is available in

     your state.

     

     

     Car Insurance

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       If you use an auto for your business activities - for

     example, transporting supplies or products, visiting customers,

     or ferrying employees or customers - you need to make certain

     that your automobile insurance will protect you from accidents

     which may occur while on business.  In many cases, your personal

     automobile policy - which covers taking the kids to see their

     grandmother, picking up the groceries, or any one of thousands of

     personal tasks - can also cover the business use of your auto.

     In some cases, however, depending on your type of business and

     the kind of vehicles you own, you may need to purchase a separate

     business auto insurance policy.  A knowledgeable insurance agent

     or company representative will be able to determine which

     approach would be best for you.

     

     

     Health Insurance

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       Don't forget that you'll also need health insurance to cover

     medical costs if you become ill or injured, and disability

     insurance if you become unable to work because of sickness or

     injury.  If you have employees, you may want to consider looking

     into small group insurance programs for your business.  Call the

     National Insurance Consumer Helpline - 1-800-942-4242 - if you

     have a question about these and other types of insurance.

     

     

     Compensating Injured Workers

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       Once you hire an employee, you may need to purchase workers

     compensation insurance to cover what it will cost if the employee

     is hurt on the job and needs medical treatment and income until

     he or she recuperates and can return to work.

     

       If you've incorporated your business, workers compensation

     insurance can also cover you, in case you are injured at work.

     Since each state has its own set of laws regulating when workers

     compensation insurance needs to be purchased, you should check

     with your insurance agent or your state's insurance department to

     find out how this applies to your business.

     

     

     Umbrella Policies

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       An umbrella policy offers you extra liability insurance that

     pays for a loss when the limits of your underlying policy are

     reached.  So, if you're responsible for someone's injury that

     requires $150,000 of medical treatment and the liability limit in

     your underlying policy is $100,000, your umbrella policy will pay

     the additional $50,000.

     

       Keep in mind that most personal umbrella policies that are

     tacked onto a homeowners or personal auto policy will cover

     liability stemming from business activities and business property

     only if covered by the basic policies.  Always check your policy

     to see how it defines business and business property, or ask your

     agent.

     

     

     Finding an Agent

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       Instead of winging it alone, home business owners would do

     well to assemble a cadre of advisers, including an insurance

     agent or company representative.  Make sure that the agent or

     representative you select is knowledgeable about insurance for

     your type of business.  You might ask other home business owners,

     especially someone who has a home business similar to yours, to

     recommend an agent for you.  Or check with the state or national

     trade association that covers owners of businesses like yours.



       It's a good idea to get proposals for insurance coverages

     from two or three different agents.  Compare the proposals,

     prices and your impressions of the agents.  If you think the

     agent or company representative is someone who would be

     supportive and helpful if you had a loss and had to file a claim,

     the coverage suggested seems appropriate for your business and

     the price seems reasonable, not out of line, then you've probably

     found the right insurance professional for you.  This person will

     help you figure out what your needs are and how to get the best

     coverage for you, now and as your needs change.

     

     

     Asking about Discounts

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       Insurance companies frequently offer discounts to owners of

     businesses with fire detectors or security systems.  Some

     companies also offer discounts to persons who drive a minimum

     number of miles each year.  Be sure to ask your agent or company

     representative if you're eligible for these or other discounts.

     

     

     As Your Company Grows

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       As your company thrives, keep in touch with your insurance

     agent or company representative.  Just as you would let the

     insurance professional who handles your homeowners insurance

     policy know if you added a deck to your house or bought expensive

     home entertainment equipment, so you should let the agent or

     company representative know if your business equipment, inventory

     or operation is more extensive than when you bought your policy.

     If you neglect to do so and you have a loss, you may find

     that your policy has limits far below the actual current value of

     your possessions.

     

     

     Your State Insurance Department

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       Insurance is regulated by the states, and every state has a

     state insurance department.  The head of the department is

     usually called the commissioner or superintendent of insurance.

     These departments can provide you a lot of information about

     insurance, and especially the rules that govern it in your state.

     

       This brochure is the latest in a series of publications

     produced by the Insurance Information Institute for the small and

     midsize business owner.  The most comprehensive is "Insuring Your

     Business", written by Dr. Sean Mooney, CPCU, senior vice president

     and economist at the Institute.  The first part of the book

     contains chapters on the types of insurance which all business

     owners should be aware of, such as property insurance, liability

     insurance, workers compensation and employee benefits insurance.

     The second section of the book contains information for specific

     types of businesses, such as manufacturers, restaurants, construction

     firms and trucking companies.  To order a copy of the book, which

     costs $22.50 plus $2.50 for shipping and handling, call 212-669-9250

     or fax 212-732-1916.

     

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