By David Colmans
Do you remember the name of the first person to successfully fly through the air? Neither do I. But even before the Wright Brothers did it, others came before them. Great ideas got them in the air. But, what about landing?
Today's unstable economic situation has forced many a nine-to-fiver into a new career not based in some swanky office complex but in an unused bedroom or den at home. This is where the entrepreneur starts out with a great idea, a laptop, an Internet connection and a dream that he or she can not only survive but make it big.
OK, here's one of those landing gear things to consider. You are "safe" in your home. You go on-line to a legal forms site and fill out a few forms, and now you are Way Cool LLC or Hot Stuff Inc. You get a smart phone and a web-based service that makes you sound like a very cool dude with a neat phone system.
Let's get back to your spacious office in the den or an unused bedroom. So, you have office equipment, files, a paper shredder, sales materials, and a desk system you bought at a discount furniture store.
One day you are on a business call and your home is reduced to a pile of rubble during a thunderstorm because an ill-placed lightning bolt nailed your international headquarters.
Not to worry. You have a good homeowners insurance policy, right? Wrong. The home-based business you have grown is NOT covered. You may have a limit of $2,500 and only $250 for off premises business losses. You are most likely going to need more coverage if a major claim arises.
Beside the office equipment you might lose via fire or theft, a client may visit you and fall down your staircase. Now you are face-to-face with a potential liability claim that would not be covered under your homeowner's policy.
How is Hot Stuff, Inc. or Way Cool LLC. going to survive if your losses cannot be covered since your homeowners policy excludes business claims?
A home-based business insurance policy, generally costing less than $500 per year, could provide coverage for your business property for up to $10,000 and would include general liability coverage between $300,000 and $1 million. If you had to shut down your business due to damage to your home, such a policy would cover the income the business loses and even ongoing expenses, such as payroll, for up to one year. There is also limited coverage for loss of valuable documents, accounts receivables, and use of equipment.
While your auto policy may cover some limited use for business, it would likely not cover you if the vehicle is used primarily for business. It will also not cover your vehicle if it is owned by the business. You would want to protect yourself from liability if you are in an accident where you are at fault. You may be sued both personally and against your business.
If your business grows and you have three or more employees, you should contact the state department of workers compensation to see if you are required to provide workers comp insurance.
In general, a home-based business should be adequately covered for:
-- Property Insurance
-- Liability Insurance
-- Business Vehicle Insurance, and
-- Workers Compensation Insurance
Other types of policies to consider:
-- Umbrella policies
-- Specialized liability policies
-- Terrorism insurance
Anyone starting a home-based business or growing such a business should contact your insurance agent or company to discuss your business needs and the types of coverage suited for your business.
David Colmans is the executive director of the Georgia Insurance Information Service. Contact him at (770) 565-3806 or by e-mail at dcolmans@giis.org.