
Do You Need Insurance for a Home-Based Business?
Courtesy of iii.org
Whether you’re running a part-time, seasonal or full-time business from your home, you’ll want to carefully consider your risks and insurance needs. Starting a business—even at home—can be a challenging venture, and having the right insurance can provide a financial safety net and peace of mind.
Your insurance choices should, in part, be based on the type of business you operate. For instance, if you’re a sole practitioner home-based accountant, you’ll have very different insurance needs than your neighbor who runs a childcare business. When considering insurance for your business, here are some questions to ask yourself:
- What type of business do I run? What are the potential risks faced by your type of business?
- What is the value of my business property? Do you have expensive equipment, such as cameras or commercial printers? Do you stock valuable business inventory, such as gemstones?
- Does my business have employees?
- Do customers or contractors visit my business at my home?
- Do I use my car or other vehicles in the course of my business operations?
- Does my business store customers’ financial and personal information on a computer or through a cloud computing service?
The answers to these questions will guide which types of insurance to purchase—and how much coverage you’ll need. For your home-based business, the main types of insurance to consider include the following:
Property and liability insurance
Depending on the nature of your home-based business, you’ll need insurance to protect the value of your business property from loss due to theft, fire or other insured perils. You’ll also need liability protection to cover costs if someone is injured as a result of visiting your business or using your product or service. Your homeowners insurance may provide some protection for your business, but it may not be sufficient. Options for property and liability insurance for home-based businesses include:
- Adding an “endorsement” to your homeowners policy
- Stand-alone home-based business insurance policies
- A Business Owners Policy—or BOP—which combines several types of coverage
Business vehicle insurance
Your personal auto insurance may provide coverage for limited business use of your car. But if your business owns vehicles or your personal vehicle is primarily used for business purposes, you’ll need business vehicle insurance.
Workers compensation insurance
If you have employees, you’ll want to strongly consider purchasing workers compensation insurance to cover costs if an employee is hurt on the job. Workers compensation insurance provides wage replacement and medical benefits to employees injured in the course of employment, in exchange for relinquishing the right to sue the employer. In some states, workers compensation insurance is mandatory, so be sure to check your state’s workers compensation website for local requirements.
Other types of insurance may be suitable for your home-based business as well. Your insurance professional can help you evaluate your needs and select insurance to meet your budget.

Get Started on Your Home Inventory
Courtesy of iii.org
Creating and updating an inventory of your personal possessions is one of the best ways to make the most of your homeowners or renters insurance, and makes filing a claim easier and more efficient.
A home inventory is simply a list of your personal possessions along with their estimated financial value. You can create a home inventory in a simple, low-tech manner by writing down everything in a notebook and keeping receipts in a folder. Or you can take advantage of technology and use a digital camera or smart phone or app to make your record.
No matter how you choose to do it, the important thing is to take action. An up-to-date home inventory will:
- Help you purchase the right amount and type of insurance. Having an accurate list of all your possessions helps you to have a more productive conversation with your insurance professional when making decisions about homeowners or renters insurance coverage. After all, if you don’t know what you have, how can you insure it adequately?
- Make filing a claim as simple as possible. Most people cannot remember what they had for breakfast much less recall the contents of their attic, kitchen cabinets or downstairs closet after a fire, storm or other catastrophe. Disasters are scary and stressful, which can make trying to list damaged property for a claims form even more challenging. Having your belongings already documented in your home inventory can be a huge relief at times like these.
- Substantiate financial losses for tax purposes or when applying for financial assistance. Following a catastrophe, the only way to determine whether you qualify for a tax break or disaster assistance is to substantiate your financial losses. A well-organized home inventory can be an extremely useful tool in this process.
Next steps: Use these tips to get started on your home inventory.

Do I Need to Insure Workers in my Home?
Courtesy of iii.org
Accidents happen—and if they happen to people you've hired to come into your home or onto your property to work, you're financially liable. It makes sense to understand how you're already covered and when to further insure household help.
Appropriate and adequate insurance coverage depends on the nature of the employee’s position and the assets you're protecting. As always, consult your insurance professional with any questions or requested changes to your policy. Here's some information to get you started.
If you contract a worker with an outside firm
For many household and in-home care needs—for example, for a nurse, a physical therapist, a cook or a housekeeper—you may decide to contract with a business or agency that provides these types of pros.
- Determine who is the employer. When you're dealing with a firm or agency, in most cases the worker you hired is an employee of that business and insured under their auspices. (If for some reason you're the employer, read on to the situations below and talk to your insurance professional.)
- Ask the firm for a copy of its certificates of insurance, which provides documentation that the firm provides workers compensation for its employees. If the firm also offers health and disability insurance, you can feel comfortable that any worker injured on your property will receive medical treatment.
If you hire occasional workers
If you occasionally hire a babysitter to take care of your children or a young person in your neighborhood to rake leaves or clean the garage, review your current insurance and:
- Learn about the current no-fault medical coverage in your homeowners policy or renters insurance. If someone other than an immediate family member is injured on your property, you can submit their medical bills directly to your insurance company for reimbursement. Make sure your policy limits are adequate to your needs.
- Check your liability insurance. Depending on your current homeowners and renters coverage and your assets, you may elect to raise the amount or buy more coverage through an umbrella liability policy.
If you hire permanent full- or part-time employees
If you hire one or more home workers on a permanent, regularly scheduled basis, consider purchasing workers compensation insurance. Workers comp provides coverage for medical care and physical rehabilitation for an employee who is injured on the job, as well as lost wages if the employee is severely hurt and no longer able to work. In the worst-case scenario, it also provides death benefits.
- Find out if your state requires workers compensation for the type of employees you're hiring (ex. housekeeper, gardener, etc.). Your state workers compensation board or agency can provide this information.
- Determine the mandatory requirements workers comp coverage. For instance, some states may require an employer who hires a certain number of employees to buy workers compensation. In other states, the determination might be based on the number of hours an employee would work.
- Don’t ignore the law. It's important to note that if you're required by law to buy workers compensation insurance and you fail to do so, your homeowners or other applicable policies will not pay for any fines, court awards or any other penalties against you.
If your employee is going to drive your car
Whatever the nature of the employee relationship, it's important to inform your auto insurance company if the person you hire is going to drive your car. For example, if you're going to lend your car to a worker to pick up groceries or take an aging parent to the doctor, your insurer needs to know about the additional driver for auto insurance purposes. Whatever the employee car usage, your insurer can explain your options.
Next steps link: Do you anticipate lots of workers because you're renovating? Know the insurance implications of remodeling your home.