Your home business insurance should be tailored to protect you against specific risks that you may be exposed to in your enterprises.
We'll take an overview of a variety of ways in which you can protect yourself and your personal assets against claims.
Liability insurance protects you against claims for injury or property damage, whether resulting from a product or a service that you provide.
For example, if a pet in your care as dog walker or pet sitter escapes from a lead and bites another person or damages property, liability insurance will provide cover for the expenses.
Note: There are many associations tailored specifically to an industry (e.g. Pet Sitting Association) who can assist you with advice for your specific home business insurance.
Property insurance will cover your physical assets such as machinery, office equipment, the building etc. You can also insure against loss of income whilst, for example, fire damage is being repaired.
Quite often a single policy will provide cover for both liability and property insurance.
Important Note: For a variety of free legal forms for your business please visit our main Independent Contractor page.
If you employ anyone, you need to investigate whether your home business insurance plan should also include worker's compensation insurance.
This type of insurance covers claims and expenses that may arise from work-related illness, injuries or accidents and may well be compulsory in your jurisdiction or industry.
Classifying a worker as an independent contractor to evade paying worker's compensation is not a solution. Refer to our page on Independent Contractor vs Employee as well as the Independent Contractor Agreement for additional information and guidelines.
Where establishing a bond has merit, is if your home business has expanded to the point where you have employees and you need protection against theft by your employees from your clients.
If your employees have access to your client's property - for example as pet sitter or during a landscaping contract - you need protection against claims by the owner. A bond is for the protection of the home owner. Note: A bond will only be paid out upon proof that a criminal act has occurred and may only be after arrest, conviction and/or sentencing.
If you are a sole proprietor you would not establish a bond - that is like insuring yourself against stealing from the home owner. Some home owners may not understand this distinction and may insist on your having a bond in place. You will need to explain to them why it makes no sense (for a sole proprietor) to be bonded and you may well lose their business.
It is also important to note that you may not be able to bond any independent contractors that you may use from time to time, without changing their status to that of employees - with the related legal obligations of worker's compensation taxes etc. Consult with a reputable insurance company on their policy procedures for bonding independent contractors.
Another "form" of home business insurance is to incorporate your business, because it shifts the liability from the sole proprietor to the limited liability of the incorporated company. It can protect personal property from lawsuits unless the owner has signed personal guarantees.
There are other advantages too, but also disadvantages which we won't go into detail here. Consult with an accountant an/or attorney in your jurisdiction before deciding whether to incorporate your business.
Professional indemnity insurance provides protection against claims from clients who suffered a loss because of acting on advice or professional opinion or because of work done by the independent contractor.
It may be compulsory to have liability insurance in place in certain professions before a license to practice will be issued. Many industries have a regulatory body who can assist members with risk assessment and insurance advice.
You need to check your local laws on whether you require a business license - even when just starting out. Having a business license in place may provide additional proof of your status as independent contractor. Operating without a license (where it is a requirement) may result in a hefty fine when caught.
A final and very important aspect of a total home business insurance plan is to get legal advice when compiling your small business forms.
Our free contract templates are just the first step to having a contract in place that clearly assigns responsibilities and liabilities. Have your legal forms reviewed and amended where necessary by an attorney in your area to ensure they meet all the legal and your specific requirements.