Choosing to start a business from your home has its rewards as well as its drawbacks. For example, as you begin your entrepreneurial adventure, you may discover that your homeowner's insurance does not cover your business needs. You will need commercial insurance to cover the business you operate out of your home as well as your homeowner's insurance. Here are some reasons why.
Insurances Only Cover Specific Things
If you check your homeowner's policy, there is probably no language in your contract that says it covers commercial activity on the same property or in the same dwelling in which you reside. If there is any language at all regarding commercial property activity, it usually refers to how your homeowner's insurance does not cover commercial or business activities on your residential property. Likewise, if you buy a commercial or business insurance policy, it does not cover your home or residential property, even if they are one and the same to you.
Dissatisfied Customers Cannot Sue You Personally (but There Are Exceptions)
This is where home-based business and insurance gets a little confusing. If you have both business insurance to protect your business and homeowner's insurance to protect your home, and you have established yourself as a limited liability company, a dissatisfied customer can only sue the business. That means your business insurance takes a hit for the claims made against it to resolve the legal issues with the customer, but the customer cannot come after your home and property unless the incident involved an accident on your property. It is important to have both types of insurance so that, whatever befalls you legally, you are protected on both fronts.
Commercial Insurance Also Protects the Finances of Your Business
Commercial insurance does something that homeowner's insurance definitely cannot. While your homeowner's insurance could replace all of your equipment and/or products in the event of a fire or natural disaster, it cannot protect the finances of your business. Some commercial and business insurance policies cover financial losses such as the inability to make business loan payments and/or operational costs for a few months while you recover from the disaster. If you can get a policy that provides this particular feature, it is a very nice extra to have along with the coverage for total recovery of office equipment, supplies, office furniture and product inventory (if you kept your products in your home office rather than at a warehouse).
Talk to a company like Paris V Mastroddi, Inc about what kind of commercial insurance would work best for you and your home business.