Insurance Essentials for Home-Based Businesses in California: Stay Protected 

More people than ever are working out of their home. If you have started a small business and are running it from your home, you may not be aware your regular home insurance will not always cover you for certain situations.   

People who run a business out of their living space often assume that their home insurance already encompasses everything in the home, including their business. In reality, home-based business insurance covers many situations that a homeowner’s policy doesn’t protect.  

Let’s dig into what kind of coverage your home-based business might need and how it can protect the hard work you’ve put into building this business. 

Understanding Home-Based Business Insurance in California 

If you own your own home, you already have explored home insurance, but home-based businesses have their own sets of concerns and liabilities. Even if you’ve already shopped for competitive home insurance costs, covering your business involves seeing what isn’t covered by your homeowner’s insurance and making sure you have protection in those areas. 

Why Do California Home-Based Businesses Need Additional Coverage? 

In California, as in other places, liability can emerge due to a variety of perils. For instance, if you store inventory for your business at home and experience a natural disaster, the estimated inventory might not be named as one of the things your insurance covers.  

You can also be liable if someone is injured on your property while you’re conducting business, or if they’re injured due to a professional mistake. Home insurance covers liability in some cases during your off-time, but if business is happening, your home insurance may not apply.  

Similarly, home-based businesses may feel informal at times due to being hosted inside your house, but simple issues, like someone slipping and falling during a business visit, could become expensive lawsuits. General liability insurance ensures that all your bases are covered when conducting business at home.  

Home-based businesses experience interruptions due to perils just like businesses that are located in a standalone commercial property. 

It’s wise to have business interruption insurance on the chance that your home and business would both be majorly affected by things like a tree falling on your house. Since both your living space and your working space would be uninhabitable until repairs are made, insurance will  help to make the impact of such an event less devastating.  

What Are the Different Types of Coverages for Your At-Home Ventures? 

While particular kinds of businesses in California face common challenges and may have specialized forms of insurance, you’ll find that a majority of home-based business owners will benefit from exploring general liability insurance, professional liability coverage called Errors and Omissions Insurance, and business interruption insurance.  

These three coverages are often packaged together in a Business Owner’s Policy, which is the normal type of insurance small business owners can benefit from the most. 

General Liability Insurance Explained 

General Liability Insurance is a policy tailored to protect you in the case of a lawsuit. When you conduct business out of your home, there could be injuries or accidents that occur during the normal workday. Or maybe you are making granola for sale out of your kitchen and someone gets sick after eating it. They may claim you did not label it accurately to avoid food allergies. Perhaps someone takes issue with a claim you have made in your advertising. 

These experiences can lead to a person suing you to cover the harm they are claiming you have done to them. Your homeowner’s insurance most likely will not pay when the alleged injury was part of your business.  

Insurers calculate rates for homeowners insurance based on the assumption of the normal activities of a home, not the operations of a home-based business. Choosing a General Liability Insurance policy can help you reduce your exposure to a higher risk of lawsuits.  

Professional Liability Coverage for Professional Services 

In many fields, specialized insurance known as Errors and Omissions Insurance covers professionals in cases where a mistake is made and injuries or losses result. For example, perhaps you have set up a financial services business and now a client is alleging your advice has cost them a lot of money. Whether it is true or not, you’ll still need financial help proving your claim in court. 

To prevent costly lawsuits from creating major setbacks in your business, carrying E&O insurance will help reduce fears that unintended mistakes in your professional line of work could cost you dearly. 

Business Interruption Insurance 

One twist of running a home-based business is that the same perils that hit your living spaces will also affect your business; if, for instance, a California wildfire means you must temporarily relocate for safety and repairs to your home, you may not be able to conduct business for a time as well. 

Business interruption insurance offers financial payouts when your business cannot be conducted due to specific events. It’s a way to keep making key payments and have a base amount of money coming in if a covered natural disaster or other threat impacts your business in California.  

What Are the Key Coverages Your California Home-Based Business May Require? 

If your home has separate structures or features that are particular to your business, you might need commercial property coverage.  

For instance, if you use a small structure on your property as a hair salon, you’d want building coverage for the structure itself as well as personal property coverage specifically for your business, for any salon equipment and other furniture inside the structure. 

When it comes to liability coverage, you most likely will focus on a general liability policy with coverage of premises, products, and completed operations. If you have any employees working at your home-based business, you may also want to look into worker’s compensation, which can help you cover costs if an employee is injured on the job.  

If you use your vehicle for business reasons – or your employees do – check out commercial auto to make sure you are covered in the event of an accident. 

As you shop for these policies, keep in mind the coverage limit you have for various categories of items in your homeowner’s insurance, and also what coverage limit you’d choose for each type of business insurance. You’ll want to get an insurance quote from your local California-based independent agent who can help identify where you’ll save money and cover your bases. 

How Do You Navigate California’s Regulations on Home-Based Business Insurance? 

California’s Department of Insurance offers comprehensive guides to help you understand the coverages needed for home-based businesses. The state has specific guidelines for how residents can operate a home-based business. According to the rules, businesses must: 

• Be confined to one room in the house. 

• Cannot alter the exterior appearance of the home. 

• Not infringe on neighbors’ rights with things like odor and noise. 

• Only park a normal number of vehicles at the residence. 

These are just examples of some of California’s rules around this type of entrepreneurship. Make sure you do a deep dive into the legalities before opening your business. 

What Makes California Different? 

Like state-based guidance in other places, California’s insurance guidelines can help you decide what kind of home-based business insurance you need. They set out the kinds of professional and liability coverages you might want even if your business is almost entirely set up in your home that is covered by renters or homeowners insurance. 

However, California has the unique challenge of certain areas being so susceptible to wildfires and homeowners with home-based businesses may struggle to find fire insurance. The California FAIR Plan is a backup option for the small percentage of Californians who find traditional insurers aren’t able to help.  

A hazard that usually isn’t covered for home-based businesses, either in homeowner’s insurance or business insurance, is earthquakes. However, California law requires that your homeowner’s insurance company offer you the option to add earthquake insurance for an additional fee.  

How Much Does Home-Based Business Insurance Cost in California?  

General liability insurance often costs only $40-$80 per month, and professional/E&O insurance only adds about $80-$100 per month on top of that. Given that general ballpark, it’s well worth your time to get a customized quote for inexpensive greater protection and peace of mind.  

While rates for home-based business insurance will of course depend on the size/scope of your business, the monetary amount of coverage you need, and the riskiness of the business activities, Californians can often receive substantial protection for a very affordable cost. 

Protect the Business You’ve Built with Affordable Business Insurance 

Don’t let unexpected risks jeopardize your home-based business. Get a personalized insurance quote today from a trusted insurance company, and protect what you’ve worked hard to build! 

When you’re ready to protect yourself with coverage that is both affordable and comprehensive, call Cost-U-Less Insurance at (800) 390-4071, or reach out online for a quote. We are also happy to chat at the Cost-U-Less office near you.