Many times, consultants working from a home office assume that a standard homeowners policy will cover losses related to a home-based business. Unfortunately, that is not the case. A typical homeowners policy may cover as little as $2500 for in-home inventory and equipment (such as computers) and $250 for incidents that occur outside the home. For example, if your laptop is stolen out of your car while at the office of a client, you would only get $250 toward that recovery, at best (and not including deductibles).
Then again, what if a client fires you and sues you for a large sum of money due to non-performance? You are not covered. What if a client comes to your office and slips and falls on your front porch? You are not covered. Worst, yet, if you suffer a house fire or other disaster and the insurance agent discovers you ran a home-based business but didn’t include that on your policy? Then your coverage for the fire could be void - for both home and business. These are worst-case scenarios, but that is why you seek insurance. It is protection when something goes wrong. There are lots of policies and coverage choices to keep you protected, but most home-based consultants should minimally obtain the following types of coverage.
An Incidental Business Endorsement is an extension of coverage, or rider, that can be attached to your basic homeowners policy. This addition in coverage usually covers replacement costs for equipment and designated space used specifically for your business. In some cases, it can also include general business liability coverage. Ask your insurance agent if your type of business qualifies for this type of add-on coverage to your current policy.
Your insurance provider may offer a combine policy that specifically covers both home and business in a single, comprehensive policy. Developed specifically to address the needs of home-based business owners, these types of combo policies usually provide general business coverage (including liability and the replacement of lost income), along with typical homeowners coverage (for theft and fire). It should cover incidents that occur at or away from the home office. Most importantly, the policy is designed to prevent duplication of coverage and is priced affordably for a truly small, home business.
Consultants should typically take out Professional Liability coverage, also known as Errors and Omissions (EO) insurance. For professionals who provide services, this type of insurance protects you and your company against claims by clients related to the performance of your work. This can include: alleged negligent acts and errors or omissions resulting from your performance, and protection from loss of client data, negligence or non-performance claims. You also want to make sure that your Professional Liability policy covers attorney fees and judgement awards; personal liability (libel and slander); intellectual property; and covers employees and independent contractors.