Insuring Your Home Office: What You Need To Know

Working from home has become the norm for many people since the COVID-19 pandemic. However, most standard home insurance policies are not designed to cover home-based businesses or work situations. If you're running a business from home, you may need to consider a different type of insurance to make sure you, your equipment, and your property are covered.

Home office equipment insurance

If you work from home, it's important to consider whether your home insurance policy covers your home office equipment. Standard homeowners insurance policies are designed to protect personal property for personal use, and there are usually liability exclusions for bodily injury and property damage arising from business-related activities. This means that your home insurance policy may not cover you for business-related claims.

Home insurance policies typically have a limit on how much they will pay to replace "business personal property" that is damaged or lost while on the "residence premises". This limit is often insufficient to replace all business items, such as laptops, desktop computers, printers, webcams, keyboards, headsets, tablets, and other equipment.

To ensure that your home office equipment is adequately insured, you may need to consider obtaining additional coverage. Here are some options to explore:

• Home-based business insurance: This type of insurance can be added as an extension to your existing home insurance policy. It will cover your office equipment, business inventory (both on and off-premise), and business interruption insurance in case of an insured loss. It will also provide additional liability coverage for clients, delivery personnel, and employees. The cost of this coverage depends on various factors, including the value of the business property and assets, your business location, and the construction of your building.
• Endorsements to your homeowners policy: You can add an endorsement to your existing homeowners policy to cover business property and liability when working from home. Examples include the "Business Pursuits Endorsement", the "Home Business Insurance Coverage Endorsement", and the "Home-Based Business Endorsement". These endorsements typically cost less than $100, with some as low as $25.
• Business Owners Policy (BOP): A BOP is a separate policy that provides broader coverage for small home businesses, including business property, equipment, and general liability coverage. It is more comprehensive than the endorsements mentioned above but may also be more expensive.

It's important to carefully review your existing homeowners insurance policy to understand what is and isn't covered. If you work for an employer, it's also worth checking with your HR department to understand what protections are extended to remote employees. If you find that your current coverage is insufficient, consider obtaining one of the additional coverage options mentioned above to ensure that your home office equipment is adequately protected.

Business interruption insurance

The cost of business interruption insurance varies depending on factors such as industry, number of employees, scope of business, and amount of coverage. According to Insureon, it typically costs between $40 and $130 per month, or $480 and $1,560 per year.

When considering business interruption insurance, it is crucial to review the specific coverage and exclusions of the policy. For example, it is important to note that this type of insurance does not usually cover damage from floods or earthquakes, undocumented income, utilities, or closure caused by communicable diseases. Additionally, it only covers financial losses and not material costs, which would be covered by commercial property insurance.

Commercial property insurance

When determining the value of your business property, commercial property insurance plans typically offer two types of coverage: replacement cost and actual cash value. Replacement cost coverage will pay to replace items with similar new ones without deducting for depreciation. Actual cash value coverage, on the other hand, reimburses you for the present-day value of the property, taking depreciation into account. As a result, actual cash value coverage will lead to a lower monthly premium but may not be sufficient to cover the cost of replacing items with new ones.

The cost of commercial property insurance depends on several factors, including the value of the business property and assets, the business location, the construction of the building, and the industry. For example, a business in an area with a higher risk of crime or vandalism may pay a higher rate. Additionally, buildings made from fire-resistant materials will generally be cheaper to insure. According to Insureon, the median cost of commercial property insurance is $67 per month or about $800 per year.

General liability insurance

Protection from Bodily Injury Claims

Property Damage Coverage

This type of insurance also protects your business from claims of property damage. For instance, if your employee accidentally damages a customer's property while working in their home, general liability insurance will cover the costs.

Personal and Advertising Injury Protection

Customizable Coverage for Home-Based Businesses

Since home-based businesses have a lower risk of accidents due to fewer visitors, some insurance providers offer reduced rates for general liability premiums. They may also customize the coverage to reflect the unique needs of your home-based business.

Peace of Mind for Business Operations

Compliance with Client Requirements

Many clients prefer to work with businesses that have general liability insurance. They may request proof of this coverage before signing a contract with your company.

In summary, general liability insurance is a vital safeguard for any home-based business. It protects your business from financial losses due to bodily injury, property damage, and personal/advertising injury claims. By choosing an insurance provider that understands the unique needs of home-based businesses, you can ensure that you have the right level of coverage at a fair price.

Business owner's policy

A business owner's policy (BOP) is a cost-effective way to insure your home office. It typically combines general liability coverage and commercial property insurance, providing comprehensive protection for small home businesses. This type of policy can be tailored to your needs with endorsements, ensuring that you have the right level of coverage for your business.

A standard BOP will cover structures on your property where your business is located, as well as damage to inventory and loss of income in the event that your home is damaged. This could include damage to business property, such as office furniture, computers, and inventory, as well as loss of income due to suspension of operations.

You can also add endorsements to your BOP for additional coverage. For example, you can include business income coverage for essential personnel and off-premises utility services, interruption of computer operations, or cyber liability insurance to protect against technology-related risks such as data breaches.

It's important to note that a BOP is different from a homeowner's policy, which typically excludes coverage for business-related activities and may not provide sufficient protection for your home office. By obtaining a BOP, you can ensure that your home-based business has the necessary coverage to protect against unforeseen costs and liabilities.

To obtain a BOP, you will need to provide information about your business, such as annual revenue and payroll details. You can then work with an insurance agent or broker to tailor the policy to your specific needs and ensure that you have the appropriate level of coverage.

Frequently asked questions