Do you have a home office? If so, how much is the equipment in that office worth? What would it cost to rebuild and reequip the office?
These are questions rarely considered by most people who rely on their home office. Statistics vary, but consistently surveys have found 50-60% of all home based businesses are uninsured. Add to that the numbers of people who telecommute or rely on a home office as a second office and those statistics rise to nearly 70% of households with a home office being uninsured.
The number one reason for this lack of protection is the belief by most home office owners (and unfortunately sometimes their agents) that their homeowner's policy is sufficient to cover any loss or damage to the home office. So let's focus on that myth first: a homeowners policy will not properly cover the loss or damage to a home office. A homeowners policy:
- is typically limited to $2500 for in office equipment and an even lower $250 away from the office (think, laptop);
- does not cover business liability;
- does not cover loss or damage due to cyber-crime;
- does not cover loss or damage of business records;
- and, does not cover damages caused by business interruption.
Elsewhere on this site I discuss business insurance for the home based business. But, even if you are not a home based business, your home office may be uninsured or underinsured if you rely solely on your homeowner's policy. Many professionals work at home or out of their house from very well equipped home offices when not in their regular office. Companies are offering employees greater and greater access to telecommuting. These home offices are often equipped with a computer, printer, phones, desk, fax/scanner, and other equipment worth more than $2500.
The home office can be insured in several ways.
- Homeowners Endorsement - Some insurers now offer home office insurance as an endorsement to the homeowners policy. The endorsement raises the amount of coverage and may cover certain losses such as a loss of records or data. Talk to your insurance professional.
- Separate Business Insurance Policies- You can purchase separate business policies for the coverage you need. For example, a business property policy to protect against loss or damage to the equipment in the office.
- Business Owners Policy Insurance- Traditionally, the business owners package was for small businesses and includes both property and liability coverage in a single policy. You might consider this if you have frequent business visitors to the home office (delivery people, couriers, clients) and are concerned about liability.
- Home Office Insurance/Home Business Insurance- Some insurers now offer a hybrid of the business owners policy and homeowners endorsement. These policies cover the loss or destruction of business property; the loss of papers and data; liability insurance and higher covered limits. This insurance is usually available as a package of insurance including homeowners and auto insurance.
The first place to start in insuring your home office is by taking an inventory of existing equipment and software. Go to the local office supply superstore and pretend you are purchasing all new equipment - what is the cost? That is the minimum limit of property insurance you will want.
Consider your data and vital paper risk. Do you store client lists or your company data on the home office computer? Do you have a log in for work access that is accessible by others in the house? Do contractors or domestic help have access to the office? Consider all of the potential ways you can lose vital data or lose vital papers and consider coverage for this loss.
Finally, consider whether you will lose income from the loss of the home office or merely be inconvenienced. Where the possibility exists of a loss of substantial income if the home office is lost, consider business interruption insurance.
