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Your Home-Based Business Needs the Right Protection

June 13, 2019

4 min read

You might be surprised by what your personal policies don't cover.

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According to Small Business Trends, 69% of U.S. entrepreneurs start their businesses at home.

You don’t need a physical storefront to succeed, but you do need the right protection when you run a home-based business.

Find out how to cover your property when it crosses the line from personal to business.

Crossing the Line From Personal to Business

At this point, the following thoughts might run through your head:

  • “I work in the garage, and I have homeowners insurance. So I’m good.”
  • “I use my own vehicle to make deliveries. It’s covered with my personal auto policy.”
  • “I see clients at home for my consulting business. The only equipment I use is my laptop.”
  • “I host a few product parties. My friends invite their friends. We drink wine and talk about leggings.”

From an insurance perspective, personal policies are personal policies and business policies are business policies. Here’s what that means:

  1. Once you start using personal belongings for your business, they’re business items.
  2. You need some form of business coverage if your run a home-based business.

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Scenario: Potholes and Furniture Empires

Taylor couldn’t take much more of the corporate world. She launched a furniture business and said “peace out” to the cubicle life.

Now she spends most of her days sawing, sanding, and painting in her garage.

On a hectic afternoon, Taylor puts the finishing touches on a solid maple dining set. She loads the furniture into her truck and heads out to make the delivery.

It’s dark and overcast, so Taylor doesn’t see the huge pothole in the road.

WHAM!

The truck bounces. Taylor pulls over and gets out.

The passenger-side front tire is flat. The rim looks bent, which probably means the steering alignment is shot.

Taylor checks the back of the truck. The table slammed into the top of the truck bed, knocking one of the legs completely off.


What Could Taylor Have Done Differently?

This is bad news. The worst news? Taylor only has personal insurance policies.

She was using the truck for a business delivery, and she was bringing business items to a customer. Her truck probably won’t be covered by insurance and neither will the table.

Before you say, “that’s not fair,” you should know the differences between a personal auto policy and a commercial auto policy.

A commercial auto policy factors in risks and liabilities that come with transporting goods, equipment, and customers. A personal auto policy won’t account for these things.

Before she launched her home-based business, Taylor should’ve contacted her local Pekin Insurance agent to discuss her business coverage needs.


What About All That Equipment?

Taylor thinks her homeowners coverage will help protect the tools and materials she uses to create furniture.

Taylor’s work requires:

  • Drills
  • Finishes
  • Hammers
  • Levels
  • Paint
  • Saws
  • Squares
  • Wood

Homeowners policies are designed with the average private citizen in mind, so they don’t account for business risks that come from:

  • Creating business goods.
  • Storing intellectual property.
  • Keeping customers’ sensitive documents on-premises.
  • Having employees work in your home.

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What Other Home-Based Businesses Need Protection?

The answer to this question is, “almost all of them.”

You should have business insurance if you do any of the following for your home-based business:

  • Have non-family employees working for you at the house.
  • Use your property for business purposes.
  • See customers or vendors at home.
  • Provide services for a cost.

These rules apply to:

  • Hosting LuLaRoe, Pampered Chef, or Beachbody parties
  • Giving clients financial advice onsite
  • Styling hair
  • Repairing electronics
  • Offering home daycare
  • And much more

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The Five Business Coverages You Need to Know About

1: Commercial auto coverage is ideal for home-based businesses that use delivery vans, utility trucks, refrigerated vehicles, private passenger vehicles, and more.

2: Business property coverage makes sense for home-based businesses that need protection for their tools, inventory, computers, and working space.

3. Commercial general liability could help protect your business if someone gets injured on your property.

4. Workers Compensation covers medical costs for many work-related accidents and illnesses.

5. Professional liability coverage (also known as errors and omissions) could help you when a client claims to suffer financial losses because of a mistake you made or a service you didn’t perform.

Look no further than Sauk Valley Insurance when you need coverage advice for your home-based business!