Nashville insurance insight: Do I need small business insurance if I work from home?

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In a creative, entrepreneurship-friendly city like Nashville, naturally, we have a lot of self-employed/work-from-home professionals. According to a recent study, it adds up to almost a quarter of us.

That’s a pretty significant number — and when you zoom out to the whole country, it makes that much more sense: More than half of all U.S. businesses are based out of the business owner’s home, according to the U.S. Small Business Administration.

Another impressive factoid: The U.S. Bureau of Labor Statistics says 15 million people, or just over 10 percent of total U.S. employment, are self-employed.

So, here we all are, doing it for ourselves. Which leads to a question I get asked a lot, as an independent Nashville insurance agent: “Since I work from home, do I need small business insurance?”

The short answer: It depends, but probably. But let’s break down the longer answer.


What to consider while considering small business insurance

First things first: If you work from home, a common assumption is that your homeowners insurance or renters insurance will cover all your business needs.

That’d be an incorrect assumption.

Most standard homeowners and renters policies won’t cover home-based businesses — including important things like lost data, lost equipment and liability.

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For policies that do cover your business equipment, you’ll generally have a pretty low limit to your coverage — in the area of $2500.

So the first thing I’d say is: Consider your risks.

How much business equipment do you have? (An inventory is helpful here.) Are you storing customer data? Do you make and sell physical products that could — even in a far-fetched scenario — cause damage to a customer?

All of these things feed into your potential risk: being robbed and losing the equipment you use to work, being hacked and losing your customers’ data, being sued because, somehow or another, your customer got hurt by a defective product.

Whatever your risks might be, there are small business insurance options that can protect you, thoroughly and specifically.

You might be able to add an endorsement to your homeowners insurance to cover business equipment adequately. You can get product liability coverage that’ll guard you and your business against potential damages related to something you created, designed or sold.

If you’re a freelancer or consultant, professional liability insurance can protect you against negligence/failure to deliver claims from clients. Or you might opt for a basic business owners policy (or BOP), which generally offers thorough coverage at doable rates for a small business owner. (A good business owners policy for a typical home-based business can be as little as $400 per year/$33 per month, depending on the size of the operation.)


A growing or on-the-move home business


Other important things to consider about your business and your coverage:

Do you drive for work? With anything from visiting clients to dropping off projects to customers, you shouldn’t expect your personal auto insurance policy to cover that business use. You’d want/need business auto coverage.

Do you have employees? If you have people working for you, you’re likely already aware of this, but: You’re on the hook for things like workers compensation, employee dishonesty, fraud… Your small business insurance needs grow considerably as you move beyond a one-man/woman band.


Losing time, losing business

Beyond initial issues like equipment or data loss, you have potential business interruption in the wake — another thing your standard home insurance isn’t designed to cover.

A BOP will usually have business interruption/continuation coverage that’ll help keep you steady when a catastrophe arises.


Sorting out your small business insurance


If you’re running your own business from home in Nashville, I’d say think about what you do, who you interact with, what the inherent risks are, and where you need to firm up your defenses. From there, you can come up with a more thorough approach to getting covered — an important thing that too few work-from-home pros owners do.

From the National Association of Insurance Commissioners: “Often, home-based businesses are underinsured – a fact their owners discover after an incident occurs when they realize the insurance they have is inadequate to address the magnitude of the problem.”

If you’re overwhelmed or uncertain, I’d be glad to go over what your risks might look like, and what your options are, and help you pull together a small business insurance portfolio that’s tailored for your business — not too much coverage, not too little. Just right.

Reach out to Tucker Coverage with any questions or needs you might have, and if you prefer the digital approach, you can grab an online quote by filling out this form.