Recent business trends and the COVID-19 pandemic have shined a spotlight on the merits—and challenges—of working from home and home-based businesses. It's also illuminated many gaps in business insurance.
The fact is, your existing business insurance may not cover your remote work arrangement. Any home-based business or business with remote employees should consider working-from-home business insurance.
Do You Need Home-Based Business Insurance?
Many people assume that their homeowners' insurance protects them for any liability in their home, including work done at home.
Most homeowners policies exclude incidents arising from a home-based business.
Talk to your insurance agent about getting either an endorsement added to your homeowner's policy. This is the most cost-effective option but generally has a cap on business income below $10,000.
Alternatively, you can get a separate, home-based business liability policy that will cover the work you do at home. Expect to spend at least several hundred dollars annually for a separate business policy.
If you are an employee of another company and you are working from home, you do not need to obtain insurance coverage. The employer covers liability for your work, and they should already have a policy in place.
Coverage for a Home-Based Business
When shopping for home-based-business insurance, first assess what your business does and what kind of coverage you need. You may need coverage for some or all of the following:
- Equipment (such as your computers, phone, and office furniture)
- General liability (this includes injury if a client has an accident on your property)
- Vehicles you use for business purposes
- Product liability (if you sell a product)
- Professional liability (if you provide a service)
- Completed operations coverage (for work or services provided on-site for clients)
- Errors and omissions (basically for damage if you give bad advice)
- Business interruption (protection if you cannot conduct business due to disasters)
- Cyber protection (for hacks, cyberattacks, etc.)
Coverage for Employees Who Work at Home
If you own a business and have employees who are working from their homes, talk with your insurance agent to understand your current coverage. Your existing policy may not provide sufficient coverage.
For example, most business policies only cover equipment and inventory that are on-site at your business location. If your employee is using equipment or a computer at home that is owned by your business, it may not be covered for loss or damage.
Your state workers' compensation insurance may provide coverage for an employee injury that occurs if the employee is working from home, but check with your attorney to be certain.
It's also a good idea to evaluate your current business liability insurance to determine what coverage it provides for your work-at-home employees.
If you're going to be liable for injury or damages arising from work done by your employees in their homes, it makes sense to institute policies that will protect both your employees and your business.
Check to ensure your employees' environment is safe and complies with Occupational Safety and Health Administration requirements. It may be appropriate to have your employees designate an area of their home where they will conduct your business.
Be sure to either get cyberinsurance or update your existing cyberinsurance policy to include work from home.
Evaluating your business insurance and updating it as needed to reflect work-at-home situations will ensure that your business is protected.