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Last Updated on January 20, 2024 by Work In My Pajamas
Determine Your Needs
The first step is to decide what type of coverage your business needs. The majority of home based businesses are run by an individual or a family, so workman’s compensation probably won’t be a concern. However, you’ll have to carry some sort of insurance in case someone gets sick or has an accident. In addition to knowing what type of insurance you’ll need, you’ll also have to decide on the extent of coverage. If money isn’t a consideration, then simply take out all the coverage you think you’ll need to protect yourself against any eventuality. The reality is that most home based businesses operate on limited funds, so you’ll most likely have to be more discerning in choosing the type and amount of coverage you’ll need.
Types of Insurance Coverage
Insuring a home based business is similar to protecting your personal property and your family–there are four basic types of insurance to consider: health, life, home/property, and auto. The last one may or may not be necessary, depending on whether or not you use your car for business purposes.
Health insurance is a primary concern. Look closely at your options before deciding on the extent of coverage you take out. Having enough health insurance will ensure your business won’t go in the tank if you or a family member become ill or are involved in an accident and can’t work for awhile.
Life Insurance
Because your business is home based you–and possibly a family member or two–are the primary breadwinners. If something were to happen to one of you, the business probably couldn’t survive without a life insurance policy in effect that would provide for the remainder of the family. If you know there will be funds available to keep the business from going under, your stress level will be reduced, and you can concentrate on running the business.
Home/Property Insurance
Due to the fact that your business is home based, you most likely already carry insurance on your home and property. However, your present homeowner’s policy may not fully cover your home based business. For tax purposes, a portion of the home or property must be set aside for business purposes, so that complicates your homeowner’s coverage. It would be a good idea to discuss your intentions of opening a business in your home or on your property with a tax accountant and your insurance agent beforehand.
Auto Insurance
If your car is to be used for business purposes, you should also discuss its use with your insurance agent to make sure you’re properly covered. Be sure and find out if other drivers would be covered under your policy in the event you have to hire outside help for deliveries.
Extent of Coverage
This question comes up every time someone needs insurance coverage, whether it’s for a home based business or not. Exactly how much coverage do you need? The answer depends on how big your business is going to be, and somewhat on your financial situation. The easy answer is that the extent of coverage you have should be enough to survive a financial disaster–without breaking the bank to make premium payments. This could be cost prohibitive, but can be alleviated a little by taking out high deductible policies. If you go this route, set aside some money in a savings account to cover the deductible if you have to file a claim. It may be worth your time and trouble to consult with a tax attorney or accountant before deciding how much coverage to take out.
Shop Around
Even though you most likely have insurance coverage now, it may be a good idea to shop around for the best rates for your home based business. By comparing rates, you can make sure you’re not overpaying, and if you discover that better rates are available you can approach your present insurer and let them know. They may be willing to meet or beat that price.
Guest post from Bailey Harris. Bailey writes about insurance quotes for InsuranceQuotes.org.