The Types of Insurance for
Your Home Business

Depending on the nature of your business operation the types of insurance coverage you might need will vary. There are many kinds of home business insurance available at a range of prices.

As a home-based jewelry designer, the minimum you require is protection of your stock and equipment against fire and theft, and protection if someone sues you. The following brief overview is intended to alert you to the main types of coverage you may wish to consider.

  • Liability

    Liability is insurance which protects you against lawsuits, either as a result of accidents to customers when they are visiting your home or craft show booth or after they have purchased your product and taken it home. Make sure that your policy covers all legal fees for your defence and all other related costs incurred. There are two kinds of liability insurance that you should be concerned with as a home-based craft business, namely:
    1. Public Liability protects you as a business owner. This type of policy covers losses that you would be liable to pay for causing bodily injury to someone (e.g. a customer sues you for injuries sustained while falling down on your front step while coming to or from your office, studio, or workshop,) or damage to the property of others (e.g. you are installing a stained glass window in the home of one of your customers and accidentally knock over and break an heirloom vase). This type of home business insurance policy generally covers negligence on your part that accidentally causes injury to clients, customers, employees, or the general public.
    2. Product liability offers protection against a lawsuit by a customer or client who used your product and sustained bodily injury or property damage because of it (e.g. if a child swallows part of a craft toy, if a handmade nightgown inflames, or a customer injures himself from a poorly designed chair that collapsed when they sat in it, the maker of the product can be held responsible).
  • Craft & Trade Shows

    If you sell or exhibit your work at large craft or trade shows, as part of the exhibitor contract, you will likely be required to purchase your own public liability and property damage insurance. Organizers will require proof of up to one million dollar coverage for personal injury and property damage.
  • Property

    Property insurance should cover fire, theft, vandalism, third party injury and water damage. Your current basic homeowners' or apartment owner's policy may void any coverage of business-related assets. Therefore, you should request that coverage be added to include the business assets which can often be supplemented with the addition of a special rider to cover a business activity in the home.

    The property and content insurance coverage will enable you to replace or rebuild your home as well as replace inventory and equipment. Make sure your policy is a "replacement" policy and covers business use of the premises.

    Depending on the processes used in your jewelry making and the risk involved, a new commercial policy may be called for. The insurance company will consider the amount of both raw and finished products on hand and any flammable materials or hazardous processes which are used. They will also take into consideration the type and value of equipment you use, and the power required to operate it.

  • Automobile

    Automobile insurance protects against physical damage to the car and bodily injury to the passengers as well as damage to other people's property, car, or passengers. It also includes theft of your car. If you use your automobile for business purposes (i.e. picking up supplies, delivering products to a shop, or transporting your wares to a craft show), talk to your insurance agent about this.

    A policy issued for a car normally used only for pleasure or driving to and from work may not provide complete coverage for an accident that occurs during business use of the car, particularly if the insured is to blame for the accident. Make sure that your car is insured for business use.

  • Disability

    If your business is a corporation, you would be covered by Workmen's Compensation; however, under a sole proprietorship or partnership, only your employees are covered by Worker's Compensation. Therefore, you will need to obtain a disability income policy.

    If you become permanently or partially disabled, or ill for a short or long period of time, disability insurance coverage pays you a certain amount each month (as set out in the policy). Disability (or loss-of-income) insurance is particularly important to the self-employed who have no sick leave to draw on in case they do face illness or accident.

    The amount or benefits received from your plan may depend on the extent of your disability, check closely to see if your plan defines disabled as "totally disabled" or if "partial disabled" is also covered. The waiting period before payments commence will also be set out in the policy.

  • Workers' Compensation

    As an employer you must provide your employees with a safe work place, and safe equipment and tools. If you have employees who, through the course of their daily work, may suffer personal injury, you should make certain that they are covered by Workers' Compensation insurance in which you are legally required to pay. The insurance covers all costs that may occur due to an injury to an employee.

    If you do not have coverage and your type of business requires it, you could be personally liable for all medical and other disability losses incurred by the employee. The self-employed are not generally eligible for Workers' Compensation unless they have employees. Regulations in this regard differ by province.

  • Business Loan

    Business loan insurance will cover the balance outstanding of a business bank loan, and is usually arranged through the bank at the time of the loan. In the event of your death, the loan is paid off completely.

  • Business Interruption

    Business interruption insurance protects you if your business breaks down due to physical damage caused by fire, flood, or some other disaster which forces you to totally or partially suspend operations while you recover.

    A business interruption insurance coverage provides you with the money needed for operating costs, mortgage payments, taxes, payroll, payments on equipment, and other expenses until you return to normal working conditions. Check to make sure the coverage includes the costs of temporarily renting other premises or moving your business to another place so as to maintain continued operations.

  • Life

    Personal life insurance protects your family and personal estate in case of death. A sole proprietor and partners in a partnership put their personal assets "on the line" to support the debts of the business. Creditors may become concerned about the money that is owed to them and sue the estate of the deceased forcing the widow/er to sell the home and other personal assets in order to satisfy the claims of creditors.

    Also cash may be needed to liquidate the business or to continue the business operation until a buyer can be found. Life insurance can be very important to you if your family is dependent upon your earnings, especially if you have a young family, to cover the cost of food and shelter, and education if need be.

    Whole-life (endowment) insurance is relatively expensive. It pays to buy it when you are young, when it cost less, since the premiums usually stay the same over the years. Once you have a reasonable equity, it becomes very good collateral with which to borrow money from banks. It is usually taken out as an annuity on retirement.

    Term insurance policy premiums are less expensive than whole-life premiums, but increases in cost as you grow older. Term insurance insures a person for a specific period of time or term, and then stops. It usually pays a lump sum on death. Term life does not have a cash surrender value and it is not possible to borrow against it.

    Partnership buy-out insurance should be purchased if your are in a partnership arrangement to ensure that the business will survive on death of one of the partners. This is done by naming each of the partners the beneficiary of such life insurance so that if one of the partners should happen to die, the remaining partners can use the life insurance proceeds to buy out the deceased partner's interest from his or her heirs.



Related Articles:

The Importance of Home Business Insurance
Do you have adequate home business insurance? Here are considerations for determining your home based business insurance needs, and tips for getting the best deal.




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