Homeowner’s Insurance Might Be Insufficient for Home-Based Business Owner

An increasing number of people are achieving the American Dream by establishing a home-based business that permits telecommuting.  There are approximately 14 million small-businesses in the U.S. that are home-based.  Almost 60 percent of businesses in operation for 3.5 years or longer are run from the owner’s primary residence.  While operation of a small-business from one’s home can provide a pathway to financial freedom and independence, a lack of financial and insurance planning can turn this entrepenurial dream into a total nightmare.

Owners of many home-based businesses hold the false assumption that their personal assets are covered by their commercial insurance policy.  The inaccuracy of this assumption often is discovered when an insured must make an insurance claim and discovers that his or her personal and business assets are at-risk.  When the line is blurred between work and home, the risk to an individual’s personal and business finances often becomes apparent after it is too late.

Below we have provided an overview of personal insurance implications of a home-based business:

  • Homeowner’s Coverage: Homeowner’s policies typically are not adequate for business needs and exposure.  An insured may want a business owner’s policy for general liability coverage or business property and business interruption losses.  Standard homeowner’s policies typically limit losses for business property to $2,500 in items inside the home and $250 away from the home.  A homeowner’s policy also typically does not provide coverage for liability claims arising out of a home business.  A typical homeowner policy also will not cover losses connected to the interruption in business production resulting from a property loss. 
  • Auto Coverage: If your home based business uses a motor vehicle almost exclusively for a home business, the vehicle should be leased in the name of the principal insured party.  The coverage limit also might need to be increased to cover items permanently affixed to the vehicle such as refrigeration units and/or generators.  Auto insurance policies that cover business vehicles will tend to have higher limits and cover vehicles that are leased or otherwise not owned by the insured.
  • Life Insurance Coverage: If the home business is set up as a partnership, it might be worthwhile to investigate key person life insurance that names each partner as a beneficiary on the other partners’ policy.  If the partner passes away, the proceeds can be used to buy-out family members and continue business operations.
  • Health Insurance: Under the Affordable Care Act, owners of small businesses or those who are self-employed may qualify for tax credits when buying health insurance through the health insurance marketplace.

Commercial insurance coverage is a costly investment especially for startups, so business owners often must make tough decisions about the scope of coverage and policy limits.  Although the best approach is to discuss the issue with your insurance agent and an experienced insurance claims lawyer, this list can provide a helpful starting point when considering the magnitude of particular risks.  If you have questions about Florida commercial insurance claims, you are invited to contact our law firm to speak to an experienced Florida commercial insurance claims attorney.  My law firm represents policyholders in claims disputes in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free at 1-866-71-CLAIM. 

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