Business owners working from home need home-based business insurance for losses arising from third-party liability and property damage. General liability and commercial property are the two most common types of home-based business insurance policies. The typical cost for both policies can range from $950 to $1,900 annually.
Next Insurance specializes in business insurance for home-based businesses to fit your business needs. In just a few minutes, you can get multiple quotes and purchase a policy.
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Do You Need Home-based Insurance?
A quick self-assessment of your business will help you determine if you need business insurance and, if so, what type(s) you should purchase. Here are some questions you need to answer to get started:
- How much business property do you own? Most homeowner policies will offer a business insurance endorsement, but coverage is capped at between $2,500 and $5,000 in business personal property.
- Do you have any employees (including family members)? If you are just starting out, you will probably not need workers’ compensation. However, as this is required in nearly every state and some states require it for family members, you will want to ensure you understand your specific state laws.
- Do customers come into your home, or do you go into their home or business for work? Homeowner policies will not cover premise liability, nor will they cover business liability off-site. For this, you will need to purchase a general liability policy.
- Does your business offer advice or consultative services? For example, if you are a financial planner or health insurance agent conducting business from home over Zoom, you will need to get an errors and omission (E&O) policy.
According to the Small Business Administration (SBA), small businesses are the backbone of the United States economy, with 99.9% of all businesses classified as a small business. Of those, 50% of all businesses begin at home. Using that information, there are approximately 19 million home-based businesses.
Of course, this doesn’t mean the business stays in the home. So, it will be important to purchase home-based business insurance from an insurer that can scale up coverage with your business as it grows.
Home-based Business Insurance vs Homeowners Insurance
A homeowners policy is a personal policy designed to cover your home and personal contents. Depending on your insurer, there may be minimal coverage for the business property through your homeowners policy. Most home-based businesses need to consider commercial insurance because it has greater limits for both property and liability and can cover specific scenarios that a homeowners policy cannot.
For example, a customer is injured while visiting your home. Because the purpose of the visit was strictly business, your homeowners policy will likely deny coverage. If the homeowners extended coverage, then your limits would likely be insufficient. However, if you have home-based business insurance, coverage will not be an issue, and limits will be sufficient to resolve the loss while protecting your business.
How Home-based Business Insurance Works
Most homeowner policies have exclusions for business-related activities or very minimal limits (usually $2,500 or less for business personal property). Home-based business insurance refers to a policy or combination of policies that work together to protect a business being operated out of your home. The core policies are general liability, professional liability, and commercial property insurance.
Types of Home Business Insurance
The coverage you need will be determined by the size of your business, and an endorsement for your homeowners policy may be all the coverage you need. Other businesses need broader coverage, like general liability or even workers’ compensation.
Commercial general liability (CGL) covers third-party bodily injury, property damage, and related medical and legal costs. This is probably the most important and common home-based business coverage because it covers a wide range of incidents.
Home-based businesses that work with the public need CGL, especially if the homeowners policy excludes this coverage or has low limits. If you have business-related visitors coming to your home regularly or if you do business at home and other locations, you need CGL.
While the risk is greatly decreased if you do not work directly with the public, general liability also covers personal injury and advertising claims. CGL often comes with products-completed liability, too, making this coverage invaluable for your business.
Named peril losses to your business property, like fire, theft, vandalism, or even hail damage, are all covered by commercial property insurance. An ecommerce operation like a Fulfillment by Amazon (FBA) business is an example of where this would apply.
Businesses whose owners work at clients’ locations but use their homes to store equipment, like handypersons or landscapers, should consider a form of commercial property called inland marine insurance. However, if you do not own high-value equipment or use your personal property for work, like a freelance writer, then this coverage is probably not necessary for your business.
An option you may run into for home-based business insurance is a business owner’s policy, or BOP. It is a combination of three coverages: general liability, commercial property, and lost business income. Most BOPs are more affordable than purchasing all three coverages on their own.
Also called E&O insurance, professional liability is a policy that protects professionals and service-oriented business owners against liability claims arising from their mistakes or negligence. This can include incorrect advice or accidental violation of a contract. It covers legal costs and settlements.
Home-based businesses that provide professional services or advice for a fee need this coverage. This includes the following:
- Accountants and bookkeepers
- Beauty and hair salons
- Computer programmers
- Daycare services
- Financial advisors
- Legal services
- Personal trainers
- Real estate agents
If your business is not at risk of a lawsuit from bad advice or unintentional errors, then this coverage isn’t necessary.
Any home-based business with employees usually needs workers’ compensation insurance. The policy, which covers medical bills and wages from lost work time, is mandatory in nearly every state and benefits employees if they suffer a work-related injury or illness.
If your home-based business has no employees, including part-time workers, then you do not need workers’ comp. It is also not required in Texas and South Dakota, although stipulations still apply, so check your state laws.
Pro tip: Many states classify family members as employees who must be provided with workers’ compensation. This means that if you and your spouse are employed by the home-based business, you may be required to offer workers’ comp to your spouse. Check your state guidelines to find out.
One of the easiest ways to save money on business insurance is to check with your agent to see if your homeowners policy covers your business operations or if there is an endorsement available that is sufficient. If your business is low-risk and does not have high-value property, this endorsement may be the most economical option for your business.
There are two primary types of endorsements your home-based business may need, which include the following:
- Homeowners business liability endorsement: Adds business liability coverage to a homeowners policy for coverage in case clients or suppliers get hurt visiting your premises.
- Homeowners business property endorsement: Adds coverage to a homeowners policy for equipment, such as computers and printers, and other business-owned property.
The cost of the premium will be determined by the size of your business, the risk of the industry, and other factors, including the following:
- Claims history: Losses in the past three to five years can drive up the premium
- Clients in the home: Customers and vendors in your home will influence the liability cost
- Business property: The value of computers, equipment, and inventory will be considered
- Professional services: The services you offer—especially counseling, financial advice, or bookkeeping—increase the risk to the carrier
- Products: Selling food or chemical products (bath bombs) is a risk for the insurer
There are a lot of providers that offer cheap general liability with endorsements for property. Check out our roundup of the Cheapest General Liability Insurance Companies for options.
Top Home Business Insurance Providers
- Next Insurance: Best overall provider for home-based business insurance
- Hiscox: Best for businesses working at client locations
- The Hartford: Best for consultants, accountants, and architects
- American Family: Best for micro home-based businesses
- Thimble: Best for event planners or vendors
Next Insurance: Top Provider for Home-based Business Insurance
Home-based businesses come in all sorts of sizes and industries. Next Insurance insures over 1,000 different types of businesses, is available nationwide, and provides customizable insurance to match your business size. It offers a wide variety of policies—meaning whatever type of business you run out of your home, it’s the best insurance provider.
Next usually presents options with different types of coverage and limits. We received two quotes: one for basic coverage and one for deluxe.
The basic coverage was a general liability policy that contained $1 million in total general liability coverage and $1 million in total coverage for products completed. It costs $25 monthly.
The deluxe offering costs $93.68 monthly. It had the same coverage as the basic, but the limits increased to $1 million per occurrence and $2 million aggregate. It also had $15,000 in commercial property coverage with a $500 deductible.
The quote also had several enhancements, such as $50,000 lost business income and sewage and water backup. Sewage and water backup losses are usually excluded from homeowners and home-based business policies.
Next is available in 48 states and continues to grow in its products. Its emphasis is on the online experience, so you can get a quote and purchase a policy online in minutes. You can also manage your policy, file and monitor claims, and pay your bill online or through its companion iOS and Android apps. It also generates instant certificates of insurance.
The National Association of Insurance Commissioners (NAIC) monitors complaints filed with state departments of insurance. Complaints filed against Next are lower than the national average.
Next Insurance is a relatively new company, but it has the financial stability you want when it comes to handling your claims. AM Best, a financial rating service for insurance companies, rated Next A- (Excellent).
Hiscox: Best for Businesses Working at Client Locations
Many trade professionals have home-based businesses but perform work at client locations. Those businesses should consider Hiscox for their needs. It’s a small business insurer specializing in smaller businesses like single-operation handypersons, painters, and lawn care professionals. It offers insurance for over 180 professional and contractor businesses.
We received a quote for a BOP. The general liability had $300,000 aggregate and $25,000 commercial property coverage with a $1,000 deductible. The policy had several customizations, including increasing the property limit to $100,000 or decreasing it to $5,000. It also included blanket additional insureds.
While the liability limit is relatively low, Hiscox does offer higher limits if you call and review more detailed information about your business with one of its representatives.
Beyond general liability and commercial property, Hiscox offers professional liability for home-based businesses. You can customize the coverage, and the rates are reduced to reflect the lower level of risk that comes from working out of your home.
Unfortunately, Hiscox’s complaints are slightly higher than the national average with NAIC. However, on the independent review platform Feefo,[1] Hiscox has 4.7 out of 5 stars from over 1,000 reviews in the past year.
Hiscox works with various other brokers, so when shopping for insurance, you will often see a quote from it. This reflects its commitment to small businesses and its broad risk appetite.
You can get a quote and purchase and manage your policy online. Additionally, you can file a claim online or through a call. However, if you do need to speak with someone, it does not have a 24/7 contact line. Representatives are available Monday through Friday, from 10 a.m. to 7 p.m. ET.
Hiscox is a global company with over a hundred years of experience in the industry. AM Best rated Hiscox an A (Excellent).
The Hartford: Best for Accountants, Architects & Consultants
Service professionals giving advice, managing money, or working in industries with contracts need a carrier that has a specialized professional liability policy, flexibility with limits, and accessible claim services. The Hartford provides all of that and more, making it the best provider for professional service businesses that work out of their homes.
The Hartford has flexible options with coverage to help make home-based business insurance cost-effective. We received a quote for $885 annually for a BOP. It had $1 million per occurrence and an aggregate of $2 million for general liability. For commercial property, the policy would carry $25,000 with a deductible of $1,000.
You can adjust the limits if your business needs more coverage. If you have employees, you can get a quote for workers’ compensation and add $10,000 to employment practice liability insurance (EPLI). There was an option to add data breach coverage for home-based businesses that need cyber protection.
The Hartford has lower-than-expected complaints through the NAIC. When it comes to the claims experience, it also has very high reviews from its policyholders.
Most businesses can get a quote online; some can finish and purchase the policy online, while others will need to call. For the quote we received, we had to call to finalize the process.
Once you have a policy with it, you can manage the policy and claims online. You also have access to an instant COI. If you need to speak with someone about a claim, it operates a 24/7 call center.
The Hartford has the financial stability you both want for your business and expect from a provider with over 200 years of experience. The Hartford’s AM Best rating is A+ (Superior).
American Family: Best for Micro Home-based Businesses
Some home-based businesses are very small operations that don’t require much coverage or can get by with their homeowners policy. American Family has developed a custom policy specifically for businesses in that situation. It also has special endorsements for homeowner policies if you run a business out of your home.
Unfortunately, it is only available in 19 states, so you’ll need to check with your local agent to see if American Family is available for your business.
Quotes are unavailable online for small business insurance. On its website, you can enter your ZIP code to find a local agent, or you can call to get a quote.
American Family has an endorsement for homeowners who run a business out of their homes. Through the endorsement, the homeowner liability limits can also be used for liability losses related to your business. It also has an additional premise endorsement for home-based businesses with another location.
This provider even created a specialized commercial property policy for home-based businesses. The policy carries a maximum limit of $15,000 for commercial property. It does not have liability coverage
Complaints filed against American Family are slightly higher than expected for commercial property but are lower than the national average for commercial liability.
While you cannot get a quote online, you can manage your policy, pay bills, and get a quote online. It also offers an app that you can use to manage your business insurance.
If you experience a loss, it operates a 24/7 line for commercial claims, so you can notify it right away to help get your business back on its feet.
In operation since 1927, American Family has the financial strength to handle claims. AM Best rated American Family an A (Excellent).
Thimble: Best for Event Planners or Vendors
Event planners and vendors often work out of their homes and also only need insurance for a short, specified time. Thimble offers home-based business insurance that can be purchased for short-term coverage, which is customizable and instantly available. It also allows for easily customizable COIs available instantly, which is ideal for anyone involved in planning or selling at special events.
An online quote from Thimble takes minutes. We received a quote for a BOP with a $1 million total limit for general liability and a $250 deductible. The commercial property carried limits of $100,000 with a $500 deductible. The cost was $149.34, due immediately, and then 10 payments of $74.67. Alternatively, you could make one payment of $896.
While the quote we received was for one year of coverage, it offers short-term liability insurance by the job, month, or year. While this coverage is ideal for a vendor or event planner, it also offers professional liability as short-term coverage. So, for example, if you are starting a life coaching business, you can purchase professional liability just for the counseling sessions.
Since Thimble is a managing general agent (MGA), the NAIC does not track any complaints. However, on the independent site Trustpilot,[2] there are over 1,700 reviews with an average of 4.5 out of 5 stars.
After purchasing a policy online, you can manage it, file claims, and pay your bill. If you need to speak with someone, Thimble is open from Monday through Friday from 9 a.m. to 6 p.m. ET.
Thimble has Android and iOS apps where you can manage your policy and claims and get an instant COI. You can also get a quote and purchase a policy through the app. This is useful when you are looking for short-term or immediate coverage.
The policy we received a quote for is underwritten by Spinnaker Insurance Company. Spinnaker’s AM Best rating is A- (Excellent).
Frequently Asked Questions (FAQs)
If your business property exceeds the limit of your homeowners business endorsement, or if you have customers in your home or conduct business off-site, then you should get business insurance.
No, a homeowners insurance policy typically does not cover business property. If your policy includes commercial property, then the coverage may be inadequate. The average homeowners policy limit on property coverage is $2,500, which may be too low if you own inventory and equipment valued higher than that.
Home-based business insurance costs can range from $315 to $630 for general liability and from $1,000 to $1,500 annually for professional liability. It may cost only $25 to increase your homeowners limits. The cost will depend on the nature of your business, your interaction with clients, and the value of your property.
Bottom Line
Business owners working out of their homes need to ensure they have the right insurance for their business. A homeowners policy limit may be insufficient or, depending on the loss, deny coverage for a business-related claim. Home-based business insurance is a small business policy that protects your commercial property, protects against liability, and gives you peace of mind knowing your home and business are safe.
Next Insurance can give you multiple custom quotes for your home-based business in under 10 minutes. Through its app or online, you can manage your policy, file a claim, and get an instant COI.
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