Owning your own business is the dream of many women. According to a 2004 poll by Gallup and Wells Fargo, female small business owners are feeling successful and optimistic about their business. The majority report that if they had to do it over, they would make the same decision. Because millions of these small businesses are started and operated in the home, it’s important to understand how insurance works in home-based businesses.

A business that requires only a computer, telephone, and lots of “sweat equity” has little liability exposure. The basic homeowner’s policy covers a limited amount of business equipment, and there’s no liability coverage for clients who do business at the home office. But quick growth and change in service can put the owner at risk if no changes are made to cover business pursuits.

There are endorsements that can be added to the homeowner policy for an incidental office, school, or studio. Incidental means the business is secondary to the main use of the dwelling as a residence. With most insurance companies, the endorsement will extend the amount of business personal property on the premises by $5,000 for such items as furnishings, supplies, and stock of merchandise.

Premises liability also is provided so anyone doing business with you at your residence is covered if injured. This option limits the occupancy to one business; the insured must be the operator of the business, and the maximum number of persons working, excluding the insured, is two. Some of the types of occupancies that are eligible include offices for business or professional purposes; private schools or studios for music, dance, photography, and other instructional purposes; and barber/beauty shops, tailors, dressmakers, telephone exchanges, or shoe repair shops using hand work only.

Home businesses that aren’t eligible for the homeowner’s policy endorsement would need a separate commercial insurance policy. Those include craft and hobby businesses with operations conducted off premises; those that distribute merchandise to other than end-consumer wholesalers or distributors of household or personal grooming products; and those that have supplies or materials used in assembly or light production.

There are many advantages to operating a business at home. Just be sure to consult an insurance agent to ensure you aren’t putting your home or business in jeopardy. TPW