What Kind of Insurance Does a Home-based Business Need?

[Linda]

Welcome to the forum Curt,

I was curious what kind of insurance does a home-based business have to have or should have. I mean you can get sued for just about anything these days. We could certainly use your expertise on the forum. Great to have you here.

Linda

[Curt415]

Originally Posted by Linda

Welcome to the forum Curt,

I was curious what kind of insurance does a home-based business have to have or should have. I mean you can get sued for just about anything these days. We could certainly use your expertise on the forum. Great to have you here.

Linda

Hello Linda!

Home based businesses are as susceptible to lawsuits as any other business. Depending on the type of business, for example consulting or an online retailer, different coverages apply. Do you have customers come to your home? If so, liability is an issue that should be addressed. You should already have liability coverage attached to your homeowner's policy.

I'll use an example of one of my clients. She runs a flower arrangement business out of her home. When performing duties outside of the home, she is responsible for any liabilities that arise from her duties. If she had spilt water on the floor, and someone slips and falls, the injured party will most likely try and sue the owner of the premises. The owner will come back and subrogate against my client for the amount of the loss. Now if she was uninsured, that would come out of her pocket and the homeowner's would not cover it since this incident arose from her professional liability. Liability is meant to cover against 3rd party claims.

Not all homebased businesses are susceptible to these risks. What type of business are you inquiring about?

[Linda]

Curt,

The type of business I was curious about is just an ecommerce business. Just selling stuff online with your own website or by using an auction like eBay. Also if you just have a news type website that just sells ad space. I am actually curious about what all kinds of home-based business insurance needs are. Thanks for the info.

Linda

[Old Welsh Guy]

I would say none. There is no public liability, as you do not come into contact with the public. There is no employers liability, as you have no employes (unless you are a limited company when you can sue yourself

There is no product liability as that is covered by th manufacturer. So I would say none

[David Wallace]

Best way to protect yourself personally from lawsuits IMO, whether you run the business out of your home or an office/storefront is to incorporate. Then the corporation can get sued but you and your personal assets are protected. I believe that is the way it works.

As for insurance, if you run a home based business, having a designated office with equipment, etc., you may wish to look into having business insurance simply to protect those assets in case of fire, theft, etc. However, if you simply have a small office that really could serve both business and personal use, then those items should be covered under your home owner's policy I would think.

[Linda]

What gets me is I have read where people get sued for domain names. How can they do that when you buy the name and if the other forgets to renew, its their fault. I was just curious about insurance because people will sue you for just about anything, they'll make up stuff. I know if you incorporate they cannot touch your personal assets but if you don't you probably will just need a lawyer.

Linda

[David Wallace]

One thing an individual can do when they have considerable personal assets and/or wealth is to buy a balloon insurance policy that covers you for a million or so dollars. My insurance agent is trying to get me to buy one but I haven't given in yet. I already hate how much money flies out the window every month on insurance and all because we "fear the worse" whether that be related to auto, home, health, etc. Part of life I guess.

[Curt415]

Originally Posted by Linda

Curt,

The type of business I was curious about is just an ecommerce business. Just selling stuff online with your own website or by using an auction like eBay. Also if you just have a news type website that just sells ad space. I am actually curious about what all kinds of home-based business insurance needs are. Thanks for the info.

Linda

If your Ecommerce business on ebay generates more than $2000 is gross receipts, your hobby is considered to be a small business. Under the $2000 gross range, your home owners will cover any issues that arise out of your operations. Remember, this is not $2000 in profits, it's gross receipts. You don't have to worry much about liability issues since you do not have customers enter your premise. If you had done consulting work, professional liability would be required. If you sell ad space, you have to take into account the mistakes that you may make and the reprocussions that they might bring. If there are any mistakes, the clients may sue for their money. Insurance is really here to ensure legal representaion for everyone. Just make sure you are protected in whatever you do.

[Curt415]

Originally Posted by David Wallace

Best way to protect yourself personally from lawsuits IMO, whether you run the business out of your home or an office/storefront is to incorporate. Then the corporation can get sued but you and your personal assets are protected. I believe that is the way it works.

As for insurance, if you run a home based business, having a designated office with equipment, etc., you may wish to look into having business insurance simply to protect those assets in case of fire, theft, etc. However, if you simply have a small office that really could serve both business and personal use, then those items should be covered under your home owner's policy I would think.

David...Good point made, however, it is not always feasible for a small business to Incorporate since you may get double taxed.

For small businesses, a BOP (Business owners Policy) is always the best option. A BOP is a packaged policy designed for all small businesses alike. they package Building, Business personal property, and the most important, liability all together. There are companies that I have who are in the specific market of Home-based businesses. Property coverage for your belongings is important, but what is more important is a proper limit for your liability.

All legal fees paid for the defense of your business is included in Liability coverage. It cover's slip and fall on your premise, Slander and advertising liability. If someone sues you for putting up ads on your website that are misleading, you may be held liable. Insurance will pay for the whole defense and pay out if neccessary to settle the claims. Please review your liability coverages if you own small businesses!

[Curt415]

Originally Posted by Old Welsh Guy

I would say none. There is no public liability, as you do not come into contact with the public. There is no employers liability, as you have no employes (unless you are a limited company when you can sue yourself

There is no product liability as that is covered by th manufacturer. So I would say none

You are absolutely correct! However, If linda was to sell products made by someone else, but she slaps her own logo on it. There would be a products liability issue.

Linda, Just make sure whatever you sell is advertised as is. There should be no problems otherwise.