The idea of a home business is very attractive to many people. The flexibility and freedom that come with running a home business, as well as the ability to become successful financially, are draws that appeal to consumers.

However, it’s also important to understand the realities of running a home business, including the fact that your homeowners insurance might not provide you with the coverage you need for your home business.

Coverage for your home office

In many cases, homeowners policies are clear about the fact that they don’t cover business activities in your home. This means that if your home office is destroyed in a fire or natural disaster, you might not receive compensation for the portion of your home devoted to business, and you might not receive the money you need to replace damaged or destroyed equipment. This is also true of a business workshop you might have on the premises (such as in a garage or shed) and business inventory that you store in your home.

Additionally, you might not receive liability coverage for home business activities. If you have a home office, and you engage in business meetings from your office injuries to clients or partners visiting your property might not be covered. You will have to take care of the liability on your own. This can be financially devastating in some cases.

Before you start your home business, or if you have already have a home business, it makes sense to review your homeowners insurance policy. You might find your coverage limited to a rather small dollar amount (such as $1,000 or $3,000), or there might not be coverage at all. While it might not matter that much if you have a limited home office, or if you don’t have a lot of expensive equipment, if you have a full-scale operation at your home, you could be in big trouble if something happens to your home.

If you need more coverage for your home office, you can ask to have a rider added to your homeowners policy. Find out if your insurer will add a rider, and get a quote on its cost. If you can’t have a rider added to your homeowners policy, consider contacting a business insurance specialist for a separate policy. Enough people are starting to work from home that a number of insurers have provisions that allow you to purchase policies that will ensure that your home business is protected.