Insurance companies selling business insurance offer policies that combine protection from all major property and liability risks in one package. (They also sell coverages separately.) One package purchased by small and mid-sized businesses is the business owners policy (BOP). Package policies are created for businesses that generally face the same kind and degree of risk. Larger companies might purchase a commercial package policy or customize their policies to meet the special risks they face.
1. Property insurance for buildings and contents owned by the company — there are two different forms, standard and special, which provides more comprehensive coverage.
2. Business interruption insurance, which covers the loss of income resulting from a fire or other catastrophe that disrupts the operation of the business. It can also include the extra expense of operating out of a temporary location.
3. Liability protection, which covers your company’s legal responsibility for the harm it may cause to others. This harm is a result of things that you and your employees do or fail to do in your business operations that may cause bodily injury or property damage due to defective products, faulty installations and errors in services provided.
BOPs do NOT cover professional liability, commercial auto insurance, worker’s compensation or health and disability insurance. You will need separate insurance policies to cover professional services, vehicles and your employees.
Insuring an In-Home Business
Does my homeowner’s policy cover my business because I work out of my home? This is a common question amongst in-home business owners. The answer is – it may not protect everything.
If you are running a business from your home, you may not have enough insurance to protect your business equipment. A typical homeowner’s policy provides only $2,500 coverage for business equipment, which is usually not enough to cover all business property. You may also need coverage for liability and lost income. Insurance companies differ considerably in the types of business operations they will cover under the various options they offer – so it is wise to shop around for coverage options as well as price.
Regardless of the type of policy you choose, if you are a professional working out of your home, you probably need professional liability insurance. Some types of in-home businesses, such as those that make or sell food products or sell home-made personal care products, may have to buy special policies.
To insure your business, you have three basic choices, depending on the nature of your business and the insurance company you choose.
- Homeowners Policy Endorsement
You may be able to add a simple endorsement to your existing homeowner’s policy to double your standard coverage for business equipment such as computers. Sometimes for as little as $25, you can raise the policy limits from $2,500 to $5,000. Some insurance companies will allow you to increase your coverage up to $10,000 in increments of $2,500.
You can also buy a homeowner’s liability endorsement. You need liability coverage in case clients or delivery workers get hurt on your premises. They may trip and fall down your front steps, for example, and sue you for failure to keep the steps in a safe condition.
The homeowner’s liability endorsement is typically available only to businesses that have few business-related visitors, such as writers. But some insurers will provide this kind of endorsement to piano teachers, for example, depending on the number of students. These endorsements are available in most states.
- In-Home Business Policy/Program
An in-home business policy provides more comprehensive coverage for business equipment and liability than a homeowner’s policy endorsement. These policies, which may also be called in-home business endorsements, vary significantly depending on the insurer.
In addition to protection for your business property, most policies reimburse you for the loss of important papers and records, accounts receivable and off-site business property. Some will pay for the income you lose (business interruption) in the event your home is damaged in such a way that you must temporarily relocate. They will also pay for the extra expense of operating out of a temporary location.
Some in-home business policies allow a certain number of full-time employees, generally up to three. In-home business policies generally include broader liability insurance for higher amounts of coverage. They may offer protection against lawsuits for injuries caused by the products or services you offer, for example.
In-home business policies are available from homeowner’s insurance companies and specialty insurers that sell stand-alone in-home business policies. This means that you do not have to purchase your homeowner’s insurance from them.
- Businessowners Policy (BOP).
Created specifically for small-to-mid-size businesses, this policy is an excellent solution if your home-based business operates in more than one location. A BOP, like the in-home business policy, covers business property and equipment, loss of income, extra expense and liability. However, these coverages are on a much broader scale than the in-home business policy.
A BOP does not include workers compensation, health or disability insurance. If you have employees, you will need separate policies for these coverages.
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