Home-Based Business Insurance: 15 Things Home Entrepreneurs Must Know in 2023

Home-Based Business Insurance: 15 Things Home Entrepreneurs Must Know in 2023 || NeoDrafts

  • Author : Jeone Ben
  • Published : September 28, 2023

Home-Based Business Insurance: 15 Things Home Entrepreneurs Must Know in 2023

Starting a home-based business can be an exciting and liberating venture. With the flexibility to set your own schedule and eliminate daily commutes, more entrepreneurs are turning their homes into the headquarters of their dreams. However, amid the excitement, paying attention to the importance of insurance coverage is crucial. Home-based business insurance safeguards your enterprise against potential risks, providing you with peace of mind to focus on your passion. In this comprehensive guide, we’ll explore 15 essential things home entrepreneurs must know about securing the right insurance for their businesses.

Home-Based Business Insurance: 15 Things Home Entrepreneurs Must Know in 2023

  1. Understand Your Homeowner’s Insurance Limitations:

If you assume your standard homeowner’s insurance covers your business activities, you may be in for a rude awakening. Homeowner’s insurance typically excludes business-related liabilities and damages. As a result, a home-based entrepreneur must invest in a separate business insurance policy.

Starting a home-based business doesn’t automatically extend your homeowner’s insurance to cover your business-related risks. In fact, relying solely on your homeowner’s policy might lead to disastrous consequences if your insurer denies a claim due to business-related damages or liabilities. To avoid financial pitfalls, it’s essential to secure a separate business insurance policy that aligns with your entrepreneurial endeavors. According to the U.S. Small Business Administration, nearly 60% of home-based businesses lack adequate insurance coverage, putting them at significant financial risk in case of accidents or legal issues. [1]

  1. Evaluate Your Business Risks:

Every business faces unique risks, and your home-based enterprise is no exception. Conduct a risk assessment to identify potential hazards, such as client injuries on your property, data breaches, or product liability concerns. Tailoring your insurance policy to address these risks can save you from substantial financial losses.

Running a home-based business doesn’t make you immune to potential risks and liabilities. Conducting a thorough risk assessment should be the first step in crafting your insurance strategy. Consider your activities and possible scenarios that could lead to financial loss or legal action. Identifying your business’s vulnerabilities will allow you to select the most suitable insurance coverage to mitigate those risks effectively.

  1. General Liability Insurance is Vital:

General Liability Insurance is the cornerstone of a robust insurance portfolio for any business, including home-based enterprises. It protects you against third-party claims of bodily injury, property damage, or personal injury that may occur during your business operations.

Even though you run your business from home, you are still susceptible to legal claims and lawsuits. Whether a client slips and falls in your home office or alleges your product caused damage, General Liability Insurance can provide crucial protection against such situations. This policy covers legal defense costs and settlement amounts, preventing a lawsuit from derailing your entrepreneurial journey. The National Association of Insurance Commissioners reported that in 2020, liability insurance claims accounted for nearly 40% of all business insurance claims. [2]

  1. Product Liability Coverage for Home-Based Sellers:

If your home-based business involves selling products, even if you didn’t manufacture them, you might be held liable for any damages or injuries caused by those products. Product Liability Insurance can shield you from the financial burden of product-related lawsuits.

As a home-based seller, you are responsible for the safety of the products you offer to customers. Even if you don’t manufacture the items yourself, you could still be held liable for defects or damages caused by the products you distribute. Product Liability Insurance covers legal costs and damages arising from such situations, ensuring your business remains financially secure in the face of product-related claims.

  1. Cyber Insurance: Safeguarding Your Online Presence:

In an increasingly digital world, cyberattacks pose a significant threat to businesses. Cyber Insurance provides coverage against data breaches, hacking incidents, and other cyber-related risks, ensuring your business can recover swiftly from cyber incidents.

As a home-based entrepreneur, much of your business may be conducted online, from storing customer data to processing transactions. This exposes you to cyber threats, such as data breaches or ransomware attacks. Cyber Insurance is essential in protecting your business from the financial ramifications of cyber incidents, including investigation costs, notification expenses, and legal liabilities. According to the Identity Theft Resource Center, 1,108 reported data breaches in the U.S. in 2020, exposing over 300 million records.

  1. Professional Liability (Errors & Omissions) Insurance:

Home-based entrepreneurs who provide professional services or advice should consider Professional Liability Insurance. This coverage protects you against claims of negligence, errors, or omissions that may arise from your expertise.

Offering professional services from your home office comes with the risk of making mistakes or failing to meet client expectations. Professional Liability Insurance can safeguard your finances and reputation if a dissatisfied client decides to sue you for financial losses resulting from your advice or services. It covers legal fees, settlements, and judgments related to professional negligence claims. A study by Hiscox found that small businesses in the U.S. faced an average claim of $30,000 for professional liability lawsuits in 2020.

  1. Home-Based Business Property Insurance:

Protecting your business assets is crucial. Home-Based Business Property Insurance covers equipment, inventory, and other business-related property in case of theft, fire, or other covered perils.

While you may be working from home, your business assets are no less valuable than those in a traditional brick-and-mortar office. Business Property Insurance protects your essential tools, equipment, and inventory from unexpected events, such as fires, theft, or natural disasters. In the event of a covered loss, this policy provides funds to replace or repair your business property, allowing you to resume operations promptly.

  1. Business Interruption Insurance:

Unexpected events like natural disasters or accidents can disrupt your business operations, leading to a loss of income. Business Interruption Insurance compensates for lost income and helps you maintain financial stability during periods of interruption.

Even though your business is based at home, it doesn’t make you immune to external threats that can cause business disruptions. A fire, severe weather event, or other disasters can force you to close your business temporarily. Business Interruption Insurance ensures that you continue to receive income during these difficult times, allowing you to cover ongoing expenses and maintain your financial well-being until you can resume regular operations. A report by the Insurance Information Institute revealed that in 2020, business interruption claims accounted for 39% of commercial property and liability claims.

  1. Workers’ Compensation for Home-Based Employees:

If you have employees working from your home, Workers’ Compensation Insurance is essential. It provides medical benefits and wage replacement to employees injured while performing work-related tasks.

Employing workers, even in a home-based setting, carries the responsibility of ensuring their safety and well-being. Workers’ Compensation Insurance covers medical expenses, disability benefits, and lost wages for employees who sustain work-related injuries or illnesses. This coverage fulfills your legal obligations as an employer and safeguards your business from potential lawsuits arising from workplace accidents.

  1. Commercial Auto Insurance for Business Vehicles:

If your home-based business involves using vehicles for deliveries or transportation, your auto insurance may not cover any accidents during business activities. Commercial Auto Insurance ensures your business vehicles are adequately protected.

Using your personal vehicle for business purposes exposes you to significant risks, especially if you’re transporting goods or clients. Commercial Auto Insurance extends coverage to business-related vehicle use, protecting you and your business from accidents, damages, and legal liabilities. Don’t assume that your personal auto policy is sufficient, as using your vehicle for business purposes may void your personal coverage.

  1. Home-Based Business Riders:

Depending on your business’s nature, you may need specific riders or endorsements to tailor your insurance policy to suit your needs better. Examples include coverage for valuable equipment or professional tools.

Every business is unique, and so are its insurance needs. Some home-based entrepreneurs may require additional coverage to protect specific assets or aspects of their business. Business riders or endorsements can be added to your existing policies to provide additional coverage, such as insuring expensive equipment, high-value inventory, or specialty items related to your trade.

  1. Business Insurance for Independent Contractors:

If your home-based business involves hiring independent contractors, ensure they carry their own insurance. Otherwise, you could be held liable for their accidents or injuries.

Contractors you hire to perform work on behalf of your business should have their own insurance policies, such as General Liability or Workers’ Compensation, depending on their trade. Requesting proof of insurance from contractors before they start working can protect you from potential liability issues and ensure that their insurance coverage, rather than your own, will respond to any accidents or damages they cause.

  1. Deductibles and Premiums:

Carefully evaluate the deductible amounts and insurance premiums. While higher deductibles may lower premiums, ensure you can comfortably afford the deductible in case of a claim.

When choosing insurance coverage, you’ll have to consider the balance between premiums and deductibles. Opting for higher deductibles can reduce your insurance costs, but it means you’ll have to pay more out of pocket before the insurance kicks in. On the other hand, lower deductibles result in higher premiums. Assess your financial situation and risk tolerance to find the right balance that provides adequate protection without breaking the bank.

  1. Regularly Review and Update Coverage:

Review and update your insurance coverage accordingly as your home-based business grows or changes. This will ensure you’re adequately protected at all times.

A home-based business is not static; it evolves as you expand your operations or add new services. To ensure that your insurance remains relevant and adequate, it’s essential to review your coverage regularly. Stay in touch with your insurance agent and update them on any changes in your business so that they can recommend appropriate adjustments to your insurance policy.

  1. Seek Professional Advice:

Navigating the complexities of insurance can be daunting. Consult an experienced insurance agent specializing in small businesses to help you find the best coverage for your home-based enterprise.

While insurance is vital for your business’s protection, the various policies and coverage options can be overwhelming. An insurance agent with experience serving small businesses and home-based entrepreneurs can guide you through the process, helping you understand your risks and choose the most appropriate coverage for your unique business needs.


Protecting your home-based business with comprehensive insurance is vital to securing a successful future. By understanding your risks and investing in the right coverage, you can focus on what truly matters—building and growing your dream business. Embrace the power of insurance, safeguard your passion, and watch your home-based enterprise thrive!


  1. Pioneer Center for Business Opportunity. – “We help entrepreneurs plan, start and grow their businesses”. https://mypcbo.org/ 
  2. uninsured motorist Archives – Lieser Law Firm. https://lieserlawfirm.com/tag/uninsured-motorist/

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