Please click here to watch our video on reasons to insure your business Full disclosure on the video, we are insurance people, not video people, we get the message to you but if you are looking for fancy… well…. not sure you’ll find that!
If you own a business as your primary source of income and career, you likely already insure it. (I mean, if not, please call us!)
But did you know that you may need to insure that “part time”, “for fun”, “more of hobby” type of business as well? It could leave you every bit as exposed as a full time business! We wanted to take a moment and chat about the top 4 reasons you may need to insure your “Side Hustle” and when you might not need to!
Did you know;
Close to one third of working age adults in America have a “side” business today and that’s a great thing! It’s part of what makes us so special as a nation.
However, the statistics also show that only half of you entrepreneurs have your side ventures insured. This may or may not be a problem and it all depends on the business you are in.
Top 4 reasons you may need business insurance;
1. You have employees- Employees = big additional risk to you and to them and you both need to be protected. No wiggle room or gray area here. Call us and we will walk you through what type of insurance is appropriate for your risk.
2. You have equipment that you need to have covered. The number one mistake we see new businessowners make is to assume that equipment they use for business would be covered on their Home or Renters Insurance policy. A good rule of thumb is that if you are using an item to make money, there will be significant limitations on your homeowner’s coverage.
Example- During a recent snowstorm, one of our clients purchased snowplows for their truck and two ATV’s. He used them to plow the parking lots and sidewalks for many local businesses in return for payment. While a great idea, he didn’t call us first and unfortunately, one night at a jobsite, the two ATV’s were stolen from his trailer. Because the client did not have a business insurance policy, neither the ATV’s nor the snowplow attachments were covered in the claim.
3. You go to your clients homes, or they come to yours. Any time you are regularly in contact with a client in person, your risk increases.
If a customer comes to your home and slips and falls or is otherwise injured, you could be held liable and your home insurance may not cover you because you were engaged in a business activity.
Example- It’s not uncommon for people to run daycares, salons or hairstylist studios out of their homes. We see this all the time, and in the past, some home insurance companies would simply add extra coverage for these scenarios at additional cost. Today, more often than not, home insurance companies no longer offer this accommodation and specifically exclude liability coverage for the business.
4. You manufacture things that are used by your customers- Product liability is a coverage only found on a commercial insurance policy. So, if you are making anything, from necklaces to handbags to wooden spoons, it would be wise to check into commercial liability insurance. This is doubly true if you are selling any type of homemade food or drink.
When do I not need a commercial insurance policy?
Understand that every risk is unique, and you should ask your insurance agent/company to advise you for your specific situation. However, here are a couple of scenarios where you typically do not need to purchase extra coverage.
1. You have a home office- If you work as a W-2 employee and don’t have clients come to your home, you likely don’t need extra coverage. If your home office equipment (computers, printers etc) exceeds $5000 in value you should at least reach out to your insurance agent to see if any additional coverage should be added to you home insurance policy.
2. Your kids small businesses- If your young entrepreneur is under 18 and operating a small side business like a lemonade stand, yard care or babysitting (at someone else’s house), You likely do not need extra coverage . If they are driving and start a full-scale landscaping company, that is another story of course. As always, we are happy to talk thru the pros and cons if you have any concerns!
3. You don’t charge for your service or product- Monetary exchange is often the key to a home insurance company determining whether an activity is a business or not. If you aren’t selling anything, you are much less likely to be found liable in a lawsuit.
Example- We have chickens and for the first couple of years just gave the extra eggs away. Once we started selling the eggs to the neighbors, I talked with my home insurance company and we added a special hobby farm endorsement. If we decided to take that up a notch and start selling at a Farmers Market, I would then need to get a commercial insurance policy to be properly covered.
Hopefully this article has been helpful for you in determining whether or not you should have a commercial insurance policy for your business. What I hope you take away is that you should always consult an insurance professional when starting a business of any kind. We are here to help and can give invaluable advice to properly protect yourself in your new venture.
If you have questions please feel free to reach out to us today! Check out our about us page to learn a little more about our agency!