Home Based Business Insurance

[kodydog]

What Insurance Do You Need for a Home-Based Business?

I worry mostly about liability and if something should happen to the shop. I guess fire is my biggest concern. How many times have you gotten up in the middle of the night to make sure you unplugged the glue gun? Stolen or damaged tools are on my dime.

https://www.manta.com/resources/small-business-trends/insurance-for-a-home-based-business/?

[baileyuph]

What insurance needed may not be available, zoning etc.

Plus, running the business alone out of a home, could put the home owners insurance in jeopardy.

Nothing is simple and is going to get even less.

Doyle

[SteveA]

Half of the business are home based ?  That seems very high to me.  I would guess a lot of those folks may use their home address for mailing purposes, and tax write offs - but not for everyday commerce.  Like Doyle says - how do you define coverage needs and discern if a loss is related to business practices or typical home user event.  Don't depend on an insurer to favor your view of how damages occurred.
If you're working at home you have to fly low - don't take any risks whatsoever - no employees - no walk ins - limit your deliveries ....  pick up your materials don't have trucks pulling in your driveway constantly -   hope that Rose will see risks that you are not always mindful of young fellow !  Print business cards without your address and pick up everything from customers - don't allow carry ins.  Don't worry it's too much stress
SA

[MinUph]

I worked my shop for 30 years out of the garage behind our family home in the city. No issues. Had UPS, large box trucks bring furniture from stores for repairs etc. Neighbors didn't care. Maybe it has changed but I would not worry to much unless you have neighbors that you know are p*^Cks. As for insurance I carried fire for the shop and it didn't matter with homeowners.

[kodydog]

Steve makes good points and we are always concerned about liability issues. For many years we avoided customers coming to our house. We didn't advertise our address and even met our supplier at a remote location. People would call and ask for our location. We would explain insurance doesn't allow customers on the property but we pick up and deliver. Some people would get down right persistent. And we lost business from customers who wanted to know where their furniture was going.

We also missed out on the time saved by having people bring their furniture to us. We revisited this issue when we moved back to the city. When we lived in rural Suwannee County the directions to our house was complicated and on dirt roads. Now it's all paved roads and only two turns off a major county road. The other thing was building our internet presence. All of the business sites want a physical location, Especially Google. You cannot get a Google Business account without an address. We needed Google bad because we were rebuilding the business in our new location.

We found homeowners insurance that allows a home based business. We keep a neat and tidy shop inside and out. And when we are expecting a customer I always open the garage door, sweep up and clear out any trip hazards. Legally we are not compliant with zoning. But our shop was built to code and passed all inspections. We go out of our way to stay in the good graces of our neighbors. The neighbors even encouraged us to build the shop and I think they are impressed with the way we cleared the lot and details we put into the building.

We're getting business from people outside our normal delivery area. And people who are trying to save a buck like the option of bringing their furniture to us. 

[gene]

I use insurance to help protect me from losing everything. I start with my business being an LLC. Whether an LLC or a corporation, this takes all my personal property off the table if my business is sued. I don't know, but if I am intermingling my business with my personal, such as using my detached garage on my personal property, using my personal van or truck for business uses, and taking a part of my personal house as a tax deduction for business use, does this make my personal property liable in a business law suit? I don't know. I'm not in this situation so it does not apply to me. I'll do a google search and see what I can find. It's called "piercing the veil".

I have business insurance for four reasons: My lease requires me to have insurance, I've had customers (other businesses) require me to show proof of insurance, it helps to make me look like a legitimate company which I am, and if there is a claim or a law suit I will save a lot of time by having the insurance company take care of the details on my behalf and not have to hire an attorney myself if I would be required t have an attorney. My business is at a separate location from my house so I don't have that issue to deal with.

Homeowner insurance and auto insurance almost always exempt "business use". Are you using your detached garage for business use? Using your truck or van for business use? Taking a tax deduction on your house for business use? Finding out that your insurance does not cover something because of "business use" after you have a loss or a pending liability law suit is not a good thing.

Insurance can be voided if the insured is engaged in unlawful practices. Not following zoning laws? I would not want to have a claim and then find out that there is a problem here.

I think the best thing is to sit down with your insurance agent and lay everything out to him/her. It may cost you more in premiums and you might be able to off-set this with a higher deductible. I make wooden cornice boards and my agent told me that if I had a table saw in my shop he would need to add the "woodworking" classification and that is much higher rates. Who would have thought my circular saw and home made saw guides would have saved me money.

A lot of people ignore these things and just hope everything will be OK. That is one way to go. I think the purpose of insurance is to protect us from catastrophic events. Running a business in your home or on your home property without business insurance is, in my mind, the same thing as building a house on a flood plane and not having flood insurance.

Don't forget to shop for rates. My original insurance company clearly decided it did not need small businesses in my category and the rates went up every year. I switched to another insurance company who loves to insure small businesses that have been in business for a few years showing a nice cash flow and their rates were less than the innitial rates of the first insurance company.

gene

[baileyuph]

Taxes on the business income will need to be considered.  Depreciation and property inflation issues
should be considered - some will best to be ignored before and after the property is sold??

Then, rules today - what will they be going forward?

Fun stuff isn't it!

Doyle

[Mojo]

We are an LLC. Actually we have two LLC's. One for the awning company and the other for our manufacturing and parts company. We have always had LLC's because 1.) better tax write off's 2.) liability issues.

When we hit a certain sales revenue number in 2016 our CPA told us that it was time to do a Sub Chapter S designation which is easy and only requires filing through the IRS and not the State. I was late filing the sub S designation last year and it cost us $ 3,500 more in taxes ( self employment tax ). Sub Chapter S corp designations can gain you more tax savings once you hit a certain income level.

I always felt we were lucky by running a home based business in our early years. By moving to a commercial location we removed our home and property from the table in the event of a law suit ( customer tripping and falling, etc. ). I believe our liability insurance coverage is $ 2 mil. This covers us at the shop as well as off site. Every show we do we have to present an insurance certificate naming the shows promoter as a 3rd party insured. Our insurance covers us for all the shows with no limit on shows so if we get sued for off site work we are covered. I believe our insurance costs us around $ 1,200 per company per year. I do not think that is bad at all.

Law suits used to keep me awake at night. I sleep much better now with the insurance policies we have in place. There are too many ambulance chasing lawyers out there who can destroy your life for you by taking everything you own if you do not have the proper company structure ( LLC, Inc. etc.. ) and correct liability insurance.

Employer liability is a whole other ball game. Workers Comp covers us for injuries and I believe we are going to go to a personal umbrella insurance policy to protect us as individuals. I hate insurance companies but I hate getting sued even more.

Mojo