Home Based Businesses

Starting a Home-Based Business? Make Sure You’re Properly Insured

To get a quote for insuring your home based business contact Patrick O'Leary
at 610-993-1326


March 25, 2010

National Study Finds Nearly 60% of Home-Based Businesses Have No Coverage

INSURANCE INFORMATION INSTITUTE

NEW YORK, March 25, 2010— With the national unemployment rate lingering around 10 percent, millions of Americans may be tempted to start a home-based businesses. But studies show that less than half of them have any type of insurance coverage for their new endeavor, and others wrongly believe a homeowners insurance policy is sufficient, according to the Insurance Information Institute (I.I.I.).

The Bureau of Labor Statistics notes that 22 million Americans did some work at home on an average day in 2008, up from 18 million in 2003, possibly reflecting increased telecommuting as well as job losses in the private sector. It is unclear how many people who are working from home have established home-based businesses; however the number of self-employed increased from 8.5 million in January 2009 to 9.0 million by the end of the year.

A common misconception is that homeowners insurance policies offer broad coverage for a home-based business, but in fact they usually provide no more than $2,500 to replace damaged or stolen business equipment.

“Just because a business is located in your home doesn't mean your homeowners insurance policy will cover you,” said Michael Barry, vice president, Media Relations, for the I.I.I.

In addition, standard homeowners insurance policies provide neither business liability nor business income (also known as business interruption) coverage for home-based businesses. These are essential forms of protection in the event an employee or customer is injured on the premises, or a loss prompts the extended closure of a home-based business.

Depending upon the type of home-based business, separate professional liability coverage may also be necessary. Professional liability policies protect policyholders against financial losses derived from lawsuits filed against them by their clients. If liability is limited to acts of negligence, the professional liability insurance policy is known as an errors and omissions policy.

“No matter how industrious you are, one uninsured event relating specifically to your home-based business can deal a significant financial blow to the company. The key to protecting your home-based business is securing the appropriate coverage,” noted Barry.

The Independent Insurance Agents & Brokers of America (IIABA) commissioned a study in 2004 which found nearly 40 percent of home-based business owners had not purchased insurance because they thought they were protected by some other type of coverage; 30 percent said their businesses were too small to insure; and nearly 20 percent could not give a reason for not having the coverage.

Insurance companies differ considerably in the types of business coverages they offer. Some may meet the specific needs of your business, while others may not. So it is wise to shop around for coverage options as well as competitive pricing.

When insuring your home-based business, there are three basic choices, depending on the nature of your business and the insurance company you buy it from. They are as follows:

Homeowners Policy Endorsement

You may be able to add a simple endorsement or rider to your existing homeowners policy that doubles the $2,500 standard coverage for business equipment such as computers. For an additional premium charge, you can raise the policy limits for losses related to a home business to $5,000 or $10,000.

Adding an endorsement to your homeowners policy is the least expensive option, but it might not be sufficient if you have a lot of expensive business equipment. It also does not provide business liability or business income coverage.

You can buy a homeowners liability endorsement that will protect you in case clients or delivery people get hurt on your premises and sue. The homeowners liability endorsement is typically available only to businesses that have few business-related visitors, such as writers. But some insurers will provide this kind of endorsement to piano teachers, for example, depending on the number of students. These endorsements are available in most states.

In-Home Business Policy

An in-home business policy provides more comprehensive coverage for business equipment and liability than a homeowners policy endorsement. Many insurance companies offer insurance policies specifically tailored to small business. The average home-business insurance policy can cost anywhere from $250-$500. The cost depends on the type of business you operate, the kinds of safety features that are in place and the amount of coverage you decide upon.

In addition to protection for your business property, most policies reimburse you for the loss of important papers and records, accounts receivable and off-site business property. Some will pay for the income you lose (business, or income, interruption coverage) in the event your home is so badly damaged by a fire or other disaster that it cannot be used for a certain period of time. Others will also pay for the extra expense of operating out of a temporary location.

Some in-home business policies cover a certain number of full-time employees, generally up to three.

In-home business policies generally include broader liability insurance for higher amounts of coverage. They may offer protection against lawsuits for injuries caused by the products or services you offer, for example.

In-home business policies are available from homeowners insurance companies, which offer business insurance bundled with a standard homeowners policy. Stand-alone in-home business policies are also sold by some specialty insurers; in this case you do not also have to purchase your homeowners insurance from the company.

Businessowners Policy (BOP)

The Businessowners Policy, known in the insurance industry as a BOP for short, is one of a number of package policies designed to meet the insurance needs of various kinds of businesses. The key to whether a business owner is eligible for a BOP is the size of the premises, the limits of liability required, the type of commercial operation it is and the extent of its off-premises servicing and processing activities.

A BOP, like an in-home business policy, covers business property and equipment, loss of income, extra expense and liability; however, the BOP provides these coverages on a much broader scale.

A BOP doesn't include workers compensation, health or disability insurance. If you have employees, you will need separate policies for these coverages. If you are using your car for business activities—transporting supplies or products or visiting customers—you need to make certain that your automobile insurance will protect you from accidents that may occur while you are on business.

As is the case with any insurance policy, a safe work environment can help lower property premiums. Make sure you have fire detectors and a security alarm system. Also have a computer-data backup procedure, and store the data backup away from your home. If you have an effective system, it may not be necessary to pay an additional premium for loss of business data.

The I.I.I. is a nonprofit, communications organization supported by the insurance industry.

ID fraud new high in 2009, consumers fighting back

Javelin Study Finds Identity Fraud Reached New High in 2009, but Consumers are Fighting Back

http://www.prnewswire.com/news-releases/javelin-study-finds-identity-fraud-reached-new-high-in-2009-but-consumers-are-fighting-back-83987287.html

Does your homeowner's policy protect you from Identity Theft?

A Snow-covered Roof Could Be Hazardous

A roof covered high in snow might provide the perfect backdrop for your holiday card photo or a soft landing pad for Santa and his sleigh, but a serious risk to your home and family may be lurking beneath that beautiful bed of white.

Heavy snow and ice buildup routinely cause roof collapses. Even partial collapses can cause extensive damage to the interior contents of a home or business. And you’re not out of the storm when warmer weather begins to roll in. Rain on top of snow can significantly add to the weight on your roof, and poor drainage can mean interior flooding.

A little snow can cause a lot of damage

As little as six inches of snow packed on your roof could cause major damage to your home—and your wallet. Institute for Business & Home Safety (IBHS) research shows about $1 of every $5 paid for home and business property losses in recent years has stemmed from damage due to freezing weather, snow and water leaks.

Fresh snow is two to four times lighter than old snow, so your roof could hold up to four feet of fresh snow safely. But new snow on top of old snow can multiply the risk of collapse. Ice mixed with snow is extremely heavy—just one inch of ice can weigh as much as 12 inches of fresh snow.

Am I at risk?

The IBHS has some guidelines to help you determine the risk posed to your home and roof. First, the age and design of your roof are major factors:

Light metal buildings typically have less capacity to handle a high snow load, so it’s essential to keep all outbuildings clear as well as your home.

For flat roofs, the step-down area between roof sections is a potential source of roof overload because of the tendency for ice and snow collection.

Increase your safety

To be safe, consider hiring a licensed roof contractor to remove any snowfall over two feet.

To help reduce the risk of roof damage and flooding during the winter, take these preventative measures throughout the rest of the year:

Clear roof valleys and gutters of debris in the fall.

Caulk all cracks and openings in the foundation.

Inspect downspouts. They should carry water at least five feet away from foundation walls.

Ensure that the surrounding landscape is graded away from your home.

If applicable, test sump pumps before the wet season. Install a battery backup system. If you do not have a sump pump in your basement, consider having a professional install a system with battery backup.

Make sure you are protected

Most home insurance plans cover roof collapse, but many older policies may not. Call me 610-993-1326 to see if you have coverage. At Trident Insurance, we have solutions to help you and your family build a financially secure future.

Understanding Residential Reconstruction Cost

Most Insurance companies today perform an home inspection after a new homeowner policy is issued. I am consistently asked Why is the insurance coverage amount greater than the current market value? Below is some insight into WHY....

Although we are always mindful of housing values, construction activity and other related trends, insurance companies adjust their coverage limits based on the costs to rebuild after a loss. Experience has shown that rebuilding figures often are significantly higher than the costs associated with building a new home.

Rebuilding versus new construction. Newly built homes usually do not include features added after occupancy, such as interior decorating, window treatments, expensive electronic systems and home theaters. The promise is to rebuild a policyholder's home to the same specifications of the original at the time of the loss. Doing so can lead to higher costs due to high-end custom features and the use of materials that are difficult to replace.

Unreported renovations. Homeowners spent $276 billion on home renovations in 2008; 30% of that amount ($83 billion) is attributed to high-net-worth households. Two-thirds of these home improvements, from expensive electronic systems to ornate window treatments are not reported to insurance companies but would be covered under a replacement cost contract.

Building in bulk. Developers buy a large parcel of land, subdivide it into building lots and turn a profit on both the land and the home. A contractor rebuilding a single home must make all his profits from a single source. Additionally, when building several homes, materials are bought in bulk at substantial savings.

Increases in labor and material costs. Labor rates in the construction industry increased by 4.5% in 2008, while materials used in residential construction increased by 4.9%. Costs increase even more when rush orders and additional labor are necessary to rebuild a home in a short time frame.

Resale value versus replacement cost. The average resale value for homes in the U.S. dropped about 11% in 2008. However, the cost to replace a damaged home went up. According to Xactware, a supplier of software used to process 80% of U.S. property claims (used by the six largest insurance carriers), the cost to repair a property after a loss increased 5.8% in 2008.

Sources:1 Joint Center for Housing Studies, Harvard University, 2009 2 U.S. Bureau of Labor Statistics3 4Q 2008 House Price Index, Federal Housing Finance Agency, February 20094 2008 Property Report, Xactware, February 2009

Underinsured Homes

Under Insured Homes DID YOU KNOW....

If you have not reviewed your homeowners policy in the last 5 years you are most likely under insured. Construction costs and construction materials have increased along with the real estate market.
The amount to rebuild your home today is significantly higher then it was 5 years ago. The worst time to find this out is "at the time of a claim." Contact your insurance agent and request a "replacement cost estimate", this will provide you what the correct amount is to insure your home. There is also information available on the web. Don't wait until its too late!

Floods in Pennsylvania

Did you know that Pennsylvania has one of the highest rates of floods?

It indeed does, despite the fact that PA is not a coastal state. More flooding occurs in PA then most any other state. The bad news is most Pennsylvanians don't consider purchasing flood insurance because its not on the coast. The good news flood insurance in Pennsylvania is inexpensive for most homeowners. Next time your homeowners renewal is due, ask your agent what flood insurance would cost to insure your home. A property listed in an "X" zone will cost you $388 annually for $250,000 dwelling coverage and $100,000 contents.

Remember, your homeowners insurance policy does not cover floods.

Homeowners Insurance

The marketplace for homeowners insurance is changing swiftly, no longer is it the norm to insure your multi-million dollar home with your standard homeowners insurance policy.
Several insurance companies offer specific contracts for the multi-million dollar home. These insurance contracts offer coverage and terms that were frowned upon in the industry such as "Guaranteed Replacement" and unlimited coverage.
Insurance companies have provided unprecedented benefits for the high-net worth individual purchasing these multi-million dollar homes. You may be familiar with the California wildfires that destroyed dozens of homes, one particular insurance company saved 12 homes by dispatching its own fire company to place fire retardant on its insureds homes to prevent damage. The insurance companies are putting together hurricane preparedness units to avoid paying millions in damages. The benefit to the insured is obvious, the home is not severely damaged, Irreplaceable items are saved. The benefit to the insurer is millions of dollars saved not paying claims.
The personal lines insurance industry is taking a page from the commercial sector and providing loss prevention and risk management as opposed to sitting back and waiting for a catastrophe. The new realm of insurer's no longer provides the standard cookie-cutter homeowners policy.
What's your home worth? Have you looked at what your homeowner policy covers.
Homeowner insurance is overlooked until you have a claim and then its too late. Review your insurance annually. Follow this link to Trident Insurance Agency and we'll review it with you. Don't wait