Most personal insurance polices won’t protect you if you run a home-based business
HELENA, Mont. – With home-based business representing a larger share of the Montana economy, Insurance Commissioner Monica J. Lindeen warned entrepreneurs not to assume that their personal insurance policies will cover their business assets.
Most of the time they won’t.
“Unfortunately, business owners often don’t discover this mistake until after a major incident puts their business and personal finances at risk,” Lindeen said. “When it comes to insurance, what you don’t know definitely can hurt you.”
More than half of the 28 million small businesses in the U.S. are home-based.1 Some 59 percent of businesses in operation for more than three and a half years operate from the owner’s primary residence.2 But without proper insurance planning, even the most promising home-based business dream can quickly turn into a nightmare.
Lindeen encouraged Montana’s home-based business owners to visit the Insure U for Small Business website channel to get smart about business insurance early to avoid costly misunderstandings later.
The website was built by the National Association of Insurance Commissioners, the U.S. insurance industry standard-setting organization of which Lindeen currently serves as president.
Lindeen urged home-based business owners to consider the following personal insurance implications of a home-based business:
- HOME. Homeowners’ or renters’ insurance policies are rarely adequate for business needs. Owners may want to investigate a business owners’ policy or general liability, business property and business interruption/continuation insurance. Also consider increasing coverage to protect permanently attached items such as a generator or storage unit.
- AUTO. If you own or lease a vehicle almost exclusively for business use, list the business name as the principal insured.
- HEALTH. There are a variety of sources for purchasing HMOs, PPOs, EPOs and other popular health insurance plans at group rates. Under the Patient Protection and Affordable Care Act (ACA), business owners and the self-employed who purchase coverage through new health insurance marketplaces may qualify for tax credits.
- LIFE. If the home business is a partnership, consider key person life insurance which names each partner in a business as beneficiary on the other partner’s policy. If one partner dies, the other can use funds to buy out heirs, pay off loans or continue operations.
For more tips and tools to help consumers navigate complex insurance issues associated with home-based and other small businesses, visit www.InsureUOnline.org/smallbusiness.
12011 U.S. Census, Small Business Administration (SBA)
2Global Entrepreneurship Monitor 2012 United States Report (Babson College)