If you operate a home-based business, has it ever crossed your mind that you might need to rethink your insurance needs? You may assume that you're covered by your homeowner's insurance, but the reality is that this is most likely not the case. Worse yet, if you operate a home-based business (depending on what exactly this entails), your homeowner's insurance policy may not even be valid.

The purpose of your homeowner's insurance is to cover the home in which you live, but if you're using this home to conduct business, especially if that requires visitors, customers, or clients to come to your home, your insurance provider is likely to object to covering you in a standard homeowner’s policy. You may be held responsible if a visitor is hurt on your property or if you have equipment stolen, for example. This is why you need to figure out what type(s) of insurance your home-based business requires.

Business Property

If your business operation requires equipment or other property that is specific to the business itself, you're going to want business property or business contents insurance. This is especially true if this business property leaves your home. 

"Look around your home office and make a quick estimate of how much it would cost you to replace the equipment surrounding you," says Susan Ward at The Balance Small Business.1 "Most homeowner's policies have a contents limit that would easily be exceeded by claims for business equipment such as cell phones, laptops, printers, and such in the event of a loss. How much of your home office equipment would you be able to replace for that amount if it was stolen?"


Liability insurance is a must, as well, if your home-based business involves people coming to your home for any reason. This could be client visits or simply getting business packages delivered.

As explained on LegalZoom2, "If you have clients or other visitors come to your house for business purposes, then liability insurance is necessary. Liability insurance protects you and your business from being liable for damages caused to another person or property. Again, your homeowners' policy won't protect you from claims made from business visitors who may have been injured at your home-based business. For example, if someone making a business delivery to your home slips and falls, you'll need liability insurance, not homeowners insurance, in order to be covered."

If you sell products, you'll also want to look at product liability insurance, which will  cover you in the case of your product not working as intended.

There is also professional liability insurance. This will cover you if a customer makes a damages claim against you related to services you have provided. The insurance will pay for your defense. Errors and omissions insurance is similar and covers you if your business gives advice to a client, which the client claims was damaging.

Other insurance options worth considering

Business and liability insurance are likely the two categories you’ll most want to be concerned about, but depending on the nature of your business, you might consider other coverages. For example, if you drive a vehicle for work, you'll want to look at getting business coverage for that. Another option is business interruption insurance, which will help you if your operations are interrupted by a disaster, such as a fire or flood.

The bottom line is that you need to consider what kind of insurance you currently have as a home-based business owner. If the answer does not extend beyond homeowner's insurance, you likely need to make some changes/expansions to your coverage. Even if you think the chances that you will need to be covered are slim, a lack of coverage can be extremely damaging to your pocketbook and to your business itself.

If you have questions about small business insurance or other small business needs, contact one of Nevada State Bank’s small business professionals.

1. https://www.thebalancesmb.com/home-based-business-insurance-2947110

2. https://www.legalzoom.com/articles/does-your-home-based-business-need-business-insurance