Running a business from one’s home is an increasingly common trend. This leads many home-based business owners to wonder if their homeowners’ insurance policy covers business-related damages.
Understanding the limits of coverage under a standard homeowners’ policy can help business owners avoid costly surprises in case of a loss.
Limited coverage for business equipment
Homeowners’ insurance may provide limited coverage for business equipment. For instance, if a fire or theft occurs, the policy might cover some of the loss. However, the coverage amount is often minimal, usually around $2,500. This coverage may not be enough to replace all business equipment, especially for businesses that rely heavily on technology or specialized tools.
No coverage for business liability
One critical area where homeowners’ insurance falls short is liability coverage. If a client or delivery person suffers an injury on the property during business activities, the homeowner’s policy will likely not cover the claim. Business liability claims require a separate business insurance policy. Without proper liability coverage, the homeowner risks facing significant out-of-pocket expenses.
Exclusions for business property damage
Homeowners’ insurance usually excludes coverage for damage caused to or by business property. For example, if a flood or fire damages inventory stored at the house, the policy may not cover it. Additionally, if business activities cause damage to the home, such as a fire in a kitchen used for a catering business, the homeowner’s policy might exclude coverage. Business owners should consider purchasing a business owner’s policy to address these gaps.
Limited loss of income protection
Homeowners’ insurance does not typically cover lost income due to a business interruption. If a fire makes the home temporarily uninhabitable, the policy might cover additional living expenses but not the lost income from the home-based business. To protect against this, business owners can obtain business interruption insurance.
In New Jersey, homeowners insurance provides limited coverage for business-related damages. To ensure adequate protection, home-based business owners should explore additional insurance options. Without these, homeowners risk significant financial loss in case of damage or liability.