If you run a business out of your home, you need to pay special attention to your insurance coverage. Fortunately, many insurance packages are designed specifically for small and mid-size businesses, making it easier for you to obtain the insurance protection you need.

Homeowners policies

You may assume that because you have homeowners insurance, you have adequately protected your home business. Wrong! Standard homeowners policies include little or no coverage for home businesses. Policies typically cover business property on your premises only to a certain limit, usually $2,500, and may limit coverage for business property away from your premises to only $250. There's also typically no coverage for business liability, leaving you unprotected against potential liability claims from clients or others who use your products or services or who make deliveries to your home.

You may be able to add endorsements to your homeowners policy that raise your business property limits or add limited business liability protection. Keep in mind, though, that these types of endorsements are typically designed for very small businesses that have few visitors, so they may or may not be appropriate for your business.

Home office policies

If you need more comprehensive coverage than a homeowners policy with endorsements can provide, look into purchasing a home office policy. These policies vary widely, but they generally provide business liability coverage, business interruption coverages, and increased limits for your business property, along with the traditional coverages found in homeowners policies. Policies generally cover lost income and continuing expenses for a certain time period (e.g., one year) in the event your home is damaged and you're unable to work. They usually cover loss of valuable papers and accounts receivable, while offering higher limits for equipment breakdown coverage and business property used off-premises than standard homeowners policies.

Business owners policies

If you operate your business in multiple locations or you need broad protection, you may want to consider a business owners policy (BOP). A BOP is a type of commercial insurance designed specifically for small or mid-sized businesses. Traditional BOPs provide comprehensive coverage for buildings, business property used on- and off-premises, and liability exposures. Also covered are computers and other business equipment, software, data, loss of income, continuing expenses, and professional liability for certain occupations. Some insurance companies even offer BOPs tailored to the needs of home business owners.

Liability coverage

You may need more liability protection than is available through a home office or business owners policy. If so, consider purchasing an umbrella liability policy that provides increased liability limits beyond those found in separate policies. If you work in an occupation that is particularly vulnerable to professional liability (e.g., law, medicine, or day care), you may also need other types of liability protection, such as a separate professional liability policy, usually called malpractice coverage or errors and omissions coverage.

Other insurance you may need

Although business insurance policies can provide comprehensive property and liability protection for your home business, they don't cover every risk. You may need other types of insurance as well, including commercial automobile, health, disability, and life insurance. If you have employees, your state will likely also require you to carry worker's compensation insurance.

For more information

Your insurance agent or financial professional is the best source of information about the types of insurance you may need. He or she can help familiarize you with state insurance requirements, and recommend an insurance program to help protect your home business.