Most brick and mortar businesses have insurance. If you have a home-based business, whether you need insurance depends on your capacity for risk, what volume of business you are doing, and the kind of industry you are in.
As a general rule, you shouldn’t get insurance until you’re doing enough business that a fire or a lawsuit could cause serious damage. Also keep in mind that your home insurance policy generally does not cover your home-based business.
Here we will go over some of the most important types of insurance and who they apply to.
Property Insurance
This is most important for businesses that have a lot of physical components. For example, if you’re running an eBay store from home and have $50,000 worth of inventory in your garage at any given time, it may very well be worth it to get coverage for your property. This type of insurance basically covers you against physical loss in the event of a fire, flood, earthquake, etc. It may or may not include theft, depending on your policy.
Malpractice, Errors, Omissions
This type of insurance is primarily for professionals who could be accused of doing something wrong. For example, if you are running an insurance advisory website from home, you could be accused of giving poor advice. If you have this type of insurance, your legal bill and possibly even settlement will be covered. This type of insurance can also apply to people doing physical services, for example a tattoo artist. If you do a tattoo and it doesn’t look the way the customer wanted it, they got injured or for whatever reason decided to sue you, this type of insurance would also cover it.
Loss of Revenue Insurance
Finally, you can get insurance to cover your loss of revenue in the case of a disaster. Other types of insurance would cover your property, but not your lost revenue. If you have this type of insurance and your business gets hit with a fire, you’ll continue to get paid what you were earning each month for a certain period of time. It can be considered the equivalent of unemployment for home-based businesses, until you recover.
Should you get insurance for your home-based business? If you’re doing enough volume that a natural disaster would be very costly, or if you’re in a business where a lawsuit is a possibility, then it may well be a good investment.
Do some shopping. Compare at least three different companies and policies to determine how much it would cost. If you feel the investment is worth it based on how much risk it would mitigate, then get yourself a policy.
