It’s easy these days for many people to make a bit of extra money in addition to their usual job. Some use their cars to pick up a part time job delivering pizzas, distributing newspapers or even providing taxi services. Others start using the internet to their advantage to sell crafts, works of art or even extra items from inside the house. Predominantly entrepreneurial sorts are even starting their own business out of their home or participating in an activity like hosting Tupperware parties in the homes of friends.
These are all great ideas for making extra money, and it’s great if you can pull them off and be profitable. However, you might not realize that your job or small business could be putting you in financial jeopardy. Without the correct business insurance, if anything were to happen to your vehicle, customers, product inventory, equipment, or any number of other hazards, you’d be held personally financially responsible. You could end up paying for medical bills, repair bills, lawyer fees, pain and suffering and more out of your own pocket. Suddenly that side job could seem scary, but getting the proper insurance would be well worth the investment to protect revenue stream and your financial future.
Who Needs Small Business Insurance?
It’s a common belief that many of the types of business activities listed above don’t require additional insurance or are covered by existing homeowners, renters, or auto insurance policies. However, most homeowners and renters insurance policies contain a “business pursuits” exclusion, which limits payout for covered losses to no more than $2,500. When it comes to auto insurance, either you’re covered for incidents and hazards that occur while using your personal vehicle for business purposes, or you’re not. It all depends on your individual policy and the circumstances of the incident.
This misunderstanding about insurance coverage is a real problem. There are around 18 million home-based businesses in the United States, but only about 40% of them are appropriately insured, according to statistics compiled by Independent Insurance Agents of America Inc. That means nearly 11 million small businesses are gambling with their financial futures.
Different Types of Insurance for Business
The types and amounts of insurance coverage you should have for your business will depend a lot on what you do, how your business operates and what assets you have. Someone selling cosmetics could have a lot of product inventory at her home. A graphic designer or photographer could have tens of thousands of dollars in equipment, computers and software. An auto mechanic is entrusted with someone’s vehicle, both for repairs and to keep it safe from theft or vandalism. Using your car as a taxi or for delivery services puts your vehicle at risk for more accidents since you’re driving much more than average. Everyone’s exposures are different, and so are the types of policies available. Depending on your needs, these could policies include:
Business Owner’s Policy (BOP): This type of insurance offers financial protection for both liability and property damage. They tend to cover things like general business liability, theft, damage to the structure in which the business operates, loss of income, and more. BOPs provide some coverage for hazards that occur off-premises. Plumbers, electricians, and other similar businesses should have a BOP.
Home Office Policy: This type of insurance combines your homeowners policy with a business policy. Though it offers some similar coverage as a BOP, a home office policy offers less protection. This is a great choice for home-based businesses with very few visitors.
Business Pursuits Endorsement: This is simply an insurance add-on to your homeowners’ insurance policy. It provides the least protection, and is not recommended for businesses that have expensive equipment, high quantities of high- value inventory on the premises, or have customers visit onsite.
Commercial Auto Insurance Policy: Certain types of jobs and business activities that include the use of your vehicle could require this type of insurance for full coverage. Though there are some personal auto insurance policies that provide some coverage for business use, you could need commercial auto insurance or higher liability coverage to be fully protected.
This isn’t a comprehensive list. Depending on how your business operates, you may need additional coverage, more professional liability, or even insurance policies to protect your employees. Talk to your insurance agent to get recommendations for how your business should be covered.
Talk To Your Agent to Ensure Proper Coverage
Now that you know there is a possibility that you could need additional insurance, it’s time to take action to protect yourself, your family, your home, your business, and your financial future. Talk to an insurance agent to find out if you should have small business insurance, what types of coverage you might need, and in what recommended amounts. If anything bad were to happen down the road, you could be very relieved that you made the effort.