Millions of home-based business owners aren't sufficiently insured and lower income workers, men and older entrepreneurs are more often at risk -- often because they believe they are covered by their home owners policy.

If you are among the estimated 43 million people who manage your business from home you should have an insurance policy that protects your business from fire, theft, liability suits and other losses that can cripple your livelihood.

Chances are, your home owners policy won't give you the coverage you need but the protection you need is available for only a few hundred dollars a year.

At least 60 percent of in-home businesses are not adequately insured, according to a study by the Independent Insurance Agents of America (IIAA) and more often at risk are older home business operators in the 55-64 age group. Sixty-eight percent of them are more likely to choose the less comprehensive endorsements to their home owners policies rather than in-home business policies -- compared to 57 percent of young entrepreneurs and 52 percent of business owners 65 and older who are under insured.

The study also said 64 percent of home businesses managed by men don't carry adequate insurance compared to 56 percent of women home business owners.

By income, 77 percent of those with lower incomes ($15,000 to $25,000) are under insured, compared to 57 percent of middle-income ($25,000-$40,000) at-home workers and 59 percent for those making more than $50,000 from home.

The study found 44 percent of home workers don't have sufficient coverage because they believe their home owners policy provides the protection they need.

If you work at home, commingle personal and business insurance needs and later file a claim for benefits you could find your home owners policy may protect you in some areas, but not others, according to the Insurance Information Institute.

A typical home owners policy provides only a few thousand dollars coverage for business equipment which may not be enough to cover all your business property and it won't protect you from business related liability suits or business interruption, says the institute.

The institute says there are several options to consider for obtaining the home business coverage you need.

Endorsements

The cheapest coverage providing the fewest benefits, endorsements typically are only available for businesses that generate $5,000 or less in annual receipts. Added to your existing home owners policy for about $20 a year, however, they can double your standard home owners policy limits for business equipment from $2,500 to $5,000.

In-Home Business Policy

The insurance industry's response to the burgeoning home business industry is a one-shop policy which for about $200 per year insures your business property at a single location for up to $10,000. For an additional premium, the policy includes liability coverage from $300,000 to $1 million. Liability premium costs are based on how much coverage you buy.

Also, if you can't operate your business because of damage to your home, your in-home policy will cover lost income and ongoing expenses, including payroll, for up to one year, the institute says.

There's also coverage available to protect against lost valuable papers, records, accounts receivable, off-site business property and equipment.

Before you can obtain an in-home policy, the insurer may require you to have a home owners policy with the same company.

Business Owners Package Policy

For larger home-based small businesses with more than one location, a business owners policy costs more but broadens coverage provided by the in-home policy.

Finally, if you use your personal vehicle for business activities, make certain your auto policy will protect you from accidents that occur while you are conducting business.

For more details meet with your insurance professional. If you don't already have one, obtain referrals from family, friends, co-workers and others you trust who've recently had a satisfactory experience with a home business insurer.

Published: October 26, 2000

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