Millions of people in this country operate a business in their homes, and more than half mistakenly think that their homeowner insurance policy will cover any loss of business property. A home-based business owner needs two types of insurance: property damage protects against damage from a multitude of things; liability protects you against someone getting injured on your premises or by one of your products.

It is possible to insure your home-based business under the homeowner policy, but first consider the risks your business presents. Do you meet with clients in your home? If away, do you take your laptop with you? What is the total value of your computer equipment and software in the home? Quick growth and change in services provided can put the owner at risk if no changes are made to cover business pursuits.

An option can be added to your homeowner policy for incidental occupancies on your premises. Eligible occupancies include: offices for business or professional purposes; private schools or studios for music, dance, photography and other instructional purposes; small service occupancies primarily for service, rather than sales, such as barber and beauty shops, tailors, and shoe repair using handwork only. Incidental means secondary or subordinate to the main use of the dwelling as a residence. No more than one incidental occupancy can exist on a premise, with no more than two persons working, excluding the owner; and the insured must be the owner of the business.

This option automatically extends Coverage B Personal Property by $5,000 to cover business personal property on the premises for such items as furnishings, equipment, supplies and stock of merchandise in storage. Personal liability and medical expense coverage is extended to provide premises liability for the incidental office, school or studio at the same limits as provided by the homeowner policy. However, off-premises liability and product and/or completed operations coverage are not covered by this option.

Any home-based business that also has operations conducted off premises, distributes merchandise to someone other than an end consumer, stores supplies and materials used in assembly and light production, or uses their home for a bed-and-breakfast needs to be covered under a commercial property and liability policy, as they are not eligible for the business option in the homeowner policy.

So if you are considering a home-based business or currently operating one, assess your needs so you can find the best way to cover your interests. Then call your insurance agent and see if your operation fits the criteria for the incidental business option in your homeowner policy, or if you would be best served by a more inclusive business owner's policy. iBi