As someone who works from home, I understand intimately the concept of insuring the tools of my trade. Without my computer and, to a lesser extent, associated tools like a scanner and printer I wouldn’t be able to earn a living.
For Me, Maybe Not
Looking into this more closely, I’m not the one who really needs insurance. First of all, I rent, though I am looking into a place to buy. Secondly, replacing my computer equipment, the stuff I really need, would cost less than $1000. I could even get by on half that, if I got a refurbished computer and didn’t worry about replacing the clunky scanner that I don’t really need.
So just because you run a business out of your home doesn’t mean you need more insurance.
But there are people who work from home that should take this into account. And I just may rethink insurance for my writing business after I finish writing this. The thing is, many people start successful businesses from home. Maybe you’re no Mark Zuckerberg, but he and his friends started Facebook in their dorm rooms.
The Twilight Zone
The first thing to do is play devil’s advocate. Imagining what could go wrong is my wife’s job, but it’s useful to understand what sort of things can happen, which is, ironically, what insurance companies do.
Imagine if you will…
That you’re an auto mechanic who works privately from home restoring classic and antique vehicles. You keep your tools in a detached garage on the premises, where you repair and restore classic cars. One night, someone breaks into your garage and steals your tools along with your client’s car. Homeowners insurance protects against theft, but only personal items. Explaining to your insurance company that the thousands of dollars in cordless tools and that 1967 Shelby GT500 Super Snake that drove away with the tools were, in fact, personal belongings might be a stretch.
Or that you’ve got an online business that sends products out via mail. For the sake of this exercise, let’s consider that most of your products are picked up by your friendly USPS mail person. He happens to trip on that broken step you’ve been meaning to fix. Now, homeowner’s insurance protects against liability, but in this case, it very well may not, as the USPS employee wouldn’t have been carrying all those packages from your door if you hadn’t been running a business that made collecting them important to your business.
Or that you run a daycare on your premises and, after a hurricane takes off the roof, you can no longer run it. Now, the insurance company may very well pay for your roof, but it won’t pay the costs of all the business you’ve lost.
What Coverage is Best
There are various ways to cover the cost of replacing business equipment. The least expensive way is to put a rider on your homeowners’ policy. This can cost as little as $100 annually. But it only covers a couple of thousand dollars more than your homeowner’s insurance policy now. Perhaps it would be okay for someone like me, a solo business person. But for someone who uses expensive tools, like that auto mechanic above, it might not be sufficient.
That’s where an in-home policy comes in, which can be tweaked to cover as much as $10,000 or more depending on your insurance company. These policies usually cost not much more than $500 yearly, but they are designed more for businesses just starting out and part-time businesses. These policies can be worked into something manageable, by looking at deductibles and coverage amounts, and they’re good for those who need some protection but can’t yet afford the whole hog.
Regular business insurance will provide the same insurance coverage as a store, restaurant, or office. It’s what you should get if there’s a reasonable chance of you losing more than $10,000. As with any insurance, you can save yourself money by raising deductibles,
You might also want to consider other factors, such as workers’ compensation insurance or business interruption insurance. If you’re employing someone, you’ll need it, even if it’s just part-time and they work from your home. You can be found liable if your employee is injured on the premises, and your regular homeowner’s policy likely won’t cover it. It’s a workplace, after all. Just like with that mail person, you’ll need some kind of business liability coverage to protect yourself and your business.
Now, insurance companies aren’t monsters. I mean, a good insurance agent will see gaps in your coverage, and see these gaps as risks… to you. That’s his or her job. To provide the right coverage for you! An insurance product, whether for your home or business or your business in your home, should protect you against risks that will keep you from being successful. Insurance is about not having to worry.
And, for the record, once I do find my dream home, I’ll certainly consider adding on to my homeowner’s insurance.