A column on personal finance prepared by the Virginia Society of Certified Public Accountants


(April 21, 2004) – Whether you’re a writer, a masseuse, or a computer consultant, if your business is based in your home, it is important to consider its insurance needs. Don’t make the common mistake of thinking that your homeowner’s policy covers it, advises the Virginia Society of CPAs. Most homeowner’s policies cover only $2,500 worth of business equipment on your premises and offer no business-related liability protection.

CPAs point out that home-based business owners need property insurance to cover business equipment and inventory from losses due to fire, theft, and other perils. General liability insurance, which protects your company should a customer or supplier be injured while visiting your home-based business, is equally important.

There are three choices for obtaining coverage in these areas – endorsements to a homeowner’s policy, an in-home business policy, or a business owner’s policy.

Adding an Endorsement to Your Homeowner’s Policy

The easiest and least expensive option for insuring your home-based business is to purchase an endorsement to your homeowner’s policy. This broadens your existing property coverage to include some limited coverage for business assets. This option may be sufficient for business owners who have limited equipment and do not store inventory, and for those who have few customers coming to the business location.

Relying on an In-Home Business Policy

For those who require coverage beyond that provided by a homeowner’s policy endorsement, the next step up is an in-home business policy. This relatively new type of insurance fills the gap between the policy endorsement approach and the more extensive and expensive business owner’s policy. In addition to offering liability insurance and a higher level of business property coverage, these policies may provide coverage for other perils including loss of valuable papers and records, accounts receivable, and business equipment, such as laptops, taken off the premises. Some in-home business policies also provide protection against loss of income in the event the business is unable to operate because of damage to your home.

Taking Out a Business Owner’s Policy

Created specifically for small-to-mid-size companies, the business owner’s policy (BOP), like the in-home business policy, covers business property and equipment, loss of income, and liability. However, the coverage is offered on a much broader scale.

Evaluating the Need for Other Coverage

Some businesses require special insurance. If you manufacture, distribute, or sell products, consider product liability insurance for protection against claims rising from use, handling, or consumption of a product. Healthcare workers, attorneys, insurance agents, and others who offer professional services should carry professional liability insurance. If your business requires you to use an automobile, you should determine whether a separate business automobile policy is advisable. Finally, if you have any employees, you may need to have a Workers’ Compensation policy in place to cover costs resulting from an employee who is injured while on the job.

Keeping Your Coverage Current

As your business grows, your insurance needs are likely to change. Consult your CPA to determine how changes in your business and its operations can impact your insurance needs.

The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at

Lifetime Financial Planning, Inc.

Dean Knepper, CPA, CERTIFIED FINANCIAL PLANNER™ professional

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208 South King Street, Suite 201, Leesburg, Virginia, 20175

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