Article

Insurance Needs For Home-Based Businesses

Typical homeowners policies come in two types: comprehensive or basic. The former is also termed “all risk” while the latter is often referred to as “named perils”. Both types of policies cover damage caused by a wide range of things from storms to fires to theft. The all risk policy covers “everything” unless it is specifically excluded, while the named perils policy, as its moniker implies, will only cover you if your claim is for an event that is specifically mentioned in your contract.

The most popular homeowners policy sold in Canada is the “all risk” policy. But do not be lulled into a false sense of security based upon its name. Look closely at the exclusions. These policies are designed to cover the house itself and the contents found within it. They are not set up to cover any liability that may arise if a client is accidentally hurt while visiting your residence on business, nor for your office equipment.

A typical homeowners insurance policy that costs about $400 per year includes liability and limits coverage of all property used to operate a business to only $1,500 to $2,500 … hardly the cost of replacing your computer alone.

Consequently, an increasing number of companies have developed specialized packages geared to home-based businesses. These include personal liability and business contents coverage as well as disability and business interruption insurance. No two home entrepreneurs are alike, so these policies have consumers choose their insurance coverage from a menu of options that are priced at various dollar values.

The way to determine the type of insurance coverage you need is to assess the types of risks to which you and your business are exposed. Ask yourself which disaster could have the biggest financial impact on your business and then purchase only that coverage that will suit your situation.

Article ©1998 The Quarterly Dividend
Reprinted with permission