If you’re like a lot of information technology contractors, you probably value your freedom: you like being able to set your own hours, be your own boss, and choose the projects that interest you most. And if you work from home, you probably also enjoy being able to keep costs low so you can maximize your revenue.
We get it: in the 21st century, there’s no real need to report to work in an office building every day, and if you’ve got the IT skills and business savvy to make working from home a reality, more the power to you.
But we’ve talked to a lot of independent IT contractors over the years, and we’ve found that many of them aren’t aware that, should something go wrong with their home-based business, their Homeowner’s Insurance probably won’t cover it.
Read on to find out how that could translate to some pretty steep (and unexpected) bills.
No, Your Homeowner’s Insurance Doesn’t Cover That
Imagine you live in a coastal area or a flood plain. You bought flood insurance for your home and you run your IT consulting business from the stair-nook-turned-office. A big storm hits and your house is deluged, including the ground-floor stair nook/office. But not to worry, right? You’ve got that sturdy flood policy, so even though several of your computers were ruined and your office itself needs some serious repairs, you’ll be fine… right?
Actually, the answer is probably no.
Why? Because most Homeowner’s Insurance policies explicitly exclude coverage of property owned by and used for business purposes – even if that business is run entirely out of your home. So you could be out tens of thousands of dollars as you scramble to replace your gear and renovate your soggy office, unless you’ve got adequate Business Property Insurance in place.
A few days ago, I wrote about a similar topic as it applies to auto insurance for independent contractors: just as your Homeowner’s Insurance won’t cover damage done to your home-based business equipment, your Personal Auto Insurance won’t cover injuries and accidents that happen while you’re driving the car for work purposes. For that kind of coverage, you need a Hired and Non-Owned Auto Insurance policy.
How to Protect Your Home-Based Business Equipment
So what does it take for an independent IT contractor to avoid expensive property losses? Luckily, a small investment in business insurance today can prevent major repair and replacement costs down the road. Many sole proprietors who work from home qualify for a special kind of bundled business insurance called a Business Owner’s Policy (BOP). The BOP…
- Provides Business Property Insurance. This means that your equipment, gear, and even office location can be protected from certain kinds of damage and theft. If a fire torches your office, your BOP can pay you enough money to replace your computers, desk, and other damaged gear.
- Provides General Liability Insurance. This coverage pays for the legal costs associated with third-party lawsuits alleging you physically harmed or caused property damage to a third party. It would pay your lawyer’s fees, for example, if one of your clients sued you for frying their hard drive while you were supposed to be fixing it.
- Comes at a discount rate. By bundling two types of coverage together, insurance companies are able to offer discounted premiums on BOPs. That saves you money without forcing you to cut corners on your business protection.
How much can you expect to pay for a basic BOP? The specifics depend on the kind of work you do and the type of clients you serve, but you can get a ballpark idea of your business insurance costs at this insurance cost estimator.