By ignoring insurance considerations, you could be allowing your dream of an opportunity at home to become a legal and financial nightmare. If you are operating or considering operating a home-based business, be aware it is very unlikely your homeowner’s insurance (or umbrella insurance) will cover any liability your business incurs as a result of operating a business on your premises.
If an employee or customer or other patron is injured or otherwise damaged while at your home office, your homeowner’s policy will likely deny coverage for that loss. This means you will be personally responsible for paying for any injury and legal fees associated with that injury. You should carefully read your homeowner’s policy and pay special attention to exclusions or other clauses that apply to operating a business from your home.
A separate insurance policy should be purchased to cover any injuries an employee of your business might sustain while on the job. Your homeowner’s insurance may have a workman’s compensation clause but it most likely will exclude any regularly employed or regularly paid employee. There are also penalties associated with failing to provide insurance for employees’ injuries besides the business owner’s personal liability.
Lack of appropriate liability insurance on any vehicle used to operate your business could also turn your opportunity at home into a legal and financial nightmare. Most automobile policies have exclusions or other clauses that eliminate coverage for accidents in vehicles used during the regular course of any business. An automobile accident caused by yourself or an employee could be extremely expensive and will likely be excluded if the vehicle is used regularly by your business.
Further, if your employee is operating his or her own vehicle, but doing so for the benefit of your business, you are on the hook for any damages caused by that employee. An innocent trip to the post office could become a disaster for your home-based business and for the business owner personally.
If you use a vehicle in the operation of your home-based business, you should discuss this at length with your insurance carrier. There is often coverage available but you have to specifically ask for it and purchase it separately.
Lastly, any vehicle warranty you have may be eliminated or canceled by regular use of the vehicle to operate your home-based business. Carefully read your warranty and check for such exclusions or clauses so your opportunity at home does not become a liability nightmare.
By James Clapton