Side hustles and home-based businesses are on the rise. We are living in a time where it has never been easier earn an income from home, especially through technology and social media. Over the past year, in the midst of a pandemic, we saw side hustles and home-based businesses become a necessity for many looking for new ways to earn extra money.

According to a survey conducted by Side Hustle Nation, nearly 45% of Americans report having a side hustle, equating to roughly 70 million people.

If you’re reading this, there’s a good chance you fall into this category.

Perhaps you started offering professional services online.

Maybe you are handcrafting products to sell on Etsy and at local markets and craft shows.

Or you could be inviting clients to your home for tutoring or hair appointments.

In all of these cases, the risk is real, and it’s likely not covered by your standard homeowners insurance policy.

What’s the Risk?

While most homeowners insurance policies do cover a limited amount of business equipment, it’s likely that what you own is worth more than your policy’s limits. Also, your homeowners’ liability insurance probably won’t cover any injuries that may occur to the employees or clients that you have on the premises.

Common Business Coverages for Home-Based Businesses

Common coverages for home-based businesses include:

Business Property Insurance

If you use any kind of equipment to run your home-based business, including a computer, fax machine, printer, furniture, etc., you should have business property insurance to be insured against loss or damage to property used in your business. That’s because your homeowners’ policy doesn’t typically provide coverage for business equipment losses by fire or flood. Instead, you’d need business property insurance.

Liability Insurance

Liability insurance is necessary when you have clients come to your house for business purposes. It protects you and your home-based business from being liable for damages caused to another person or property. Again, your homeowners’ policy won’t protect you from claims made from business visitors who may have been injured at your home. For example, if someone making a business delivery to your home slips and falls, you’ll need liability insurance, not homeowners insurance, in order to be covered.

Professional Liability Insurance

Similar to professionals working out of their home, professionals working inside their home need professional liability insurance. If you’re a consultant, professional liability insurance can protect you against potential negligence or failure to deliver claims made by your clients.

Product Liability Insurance

Product liability insurance protects your business for damages to property or a person caused by a product you designed, manufactured or supplied.

Business Auto Coverage

If you need to make (or pick up) deliveries, visit clients or otherwise use a vehicle for business purposes, your personal auto policy won’t cover the business use of the vehicle. Instead, you’ll need business automobile coverage, which will provide coverage if you are in an accident.

Other Coverages

There are other home-based business insurance coverages that may be important, depending on your business. For example, if your business has employees, you may need workers compensation insurance. Commercial crime insurance protects against losses from equipment theft, fraud and other crimes.

Depending on the type of home-based business you have, not all coverages apply, and other coverage options may be available. Just ask us—we can help!

Protect Your Livelihood and Your Home

Just because you operate a business in your home doesn’t mean your exposures are covered—purchasing the right insurance coverage today may be the difference between success and failure. A homeowners insurance policy is designed to cover personal exposures, not business exposures. Here’s what you need to know to make sure you’ve got all your business insurance bases covered.

To understand your risk exposures, it’s important to review your property value and business exposures.

To get you thinking, here’s a list of questions to consider:

• How much is your equipment worth? Conduct an inventory, listing everything you use to operate your business.
• Does the service or product that you provide create extra liability? For example, what if you made an error? Do you serve alcohol? What happens if your product is defective? Do you take possession of your clients’ property?
• Do you stock inventory? If so, make a list of the materials and products that you sell and, if you do any of the manufacturing, the materials used to make them.
• What about vehicles? Any vehicle used for business purposes must be insured, even if it’s personally owned.
• Do you, or your employees, perform work in clients’ homes?
• Do you have employees? If so, you need the appropriate workers’ compensation coverage as required by the state.

Coverage Option 1, 2 or 3?

Based on your business needs, you have three basic coverage options to choose from, depending on your level of risk:

1. Homeowners Policy Endorsement

This provides the least amount of coverage, and therefore isn’t ideal for most home-based businesses. While it may provide enough coverage for a freelance writer or another profession with no business foot traffic, it’s not enough for someone who employs others, has clients visiting his or her home, or has valuable business equipment and/or inventory.

2. In-Home Business Policy

More comprehensive than a homeowners policy endorsement, in-home business coverage is a standalone policy that provides higher amounts of coverage for business equipment and liability.

3. Business Owners Policy (BOP)

A BOP bundles property and liability insurance into one policy. Created specifically for small- to mid-size businesses, a BOP covers your business property and equipment, loss of income, extra expenses, and liability. It’s the most comprehensive property and liability option. It doesn’t include workers’ compensation, health or disability insurance, which are available as separate policies.

So, does your side hustle or home-based business need insurance? It certainly depends the type of business you’re operating, but you’ll be much better off having a policy in place. While your passion gets you up in the morning, don’t let the risk of operating keep you up at night.