In 2024, almost 1 in 4 people worked from home, up from 1 in 5 the previous year. As more people work remotely, whether for companies or their own home-based business, the question of business insurance becomes more nuanced. Traditional business insurance covers general liability, product and service liability, professional liability, and more. But what does this protection have to do with home-based businesses? It’s more significant than many business owners realize.
Traditional, home-based, and freelance businesses all require different safeguards. Yet, much of the necessary coverage is similar. Home-based business owners should take a personal approach for covering their assets and risks. This blog outlines which business insurance policies make sense for home-based businesses located in Hawai‘i.
Primary Insurance Types for Home Businesses in Hawai‘i
For those operating home businesses in Hawai‘i, many insurance policies are similar to other types of businesses. However, they often need to be adjusted to address the differences home businesses experience, beginning with the Business Owners Policy (BOP).
Business Owners Policy
A BOP bundles three core insurance protections to give business owners a lower overall insurance premium instead of having three separate plans:
- General Liability: General liability coverage covers third-party bodily injury claims and property damage. This is especially important for businesses with clients or customers who visit the home. If a client or other work-related visitor slipped and fell in the home, for example, general liability would cover the related expenses. It also reimburses businesses for advertising injuries like libel.
- Commercial Property: When being used as a business, general liability covers property damage for the home but not for other commercial property such as inventory, equipment, and furniture used for the business. Standard homeowners insurance policies often exclude or limit coverage for commercial property, even after a covered event like a theft or a fire.
- Business Income Insurance: Business income insurance replaces lost business income, extra operating expenses, and relocation costs in the event of a temporary business closure due to a covered disaster, such as a fire.
The owners of home-based businesses should view the BOP as a foundation for protecting against three of the most common liability risks: injury claims, property damage, and income loss. However, there are other protections home-based businesses need.
Additional Coverages for Home-Based Businesses
In addition to the BOP, home-based businesses can also benefit from these types of insurance:
Professional Liability Insurance (Errors and Omissions)
Professional liability insurance, also known as errors and omissions (E&O) insurance, covers businesses against claims of negligence, professional mistakes, or actions that cause clients financial harm.
When it is needed: This coverage is particularly valuable for businesses that offer professional advice, including financial or health consultation services.
Homeowners Policy Endorsement
For smaller home-based businesses, adding endorsements to the homeowners policy may provide limited coverage. For example, property coverage may be extended to business equipment to protect it against covered events.
When it is needed: While this is not comprehensive coverage, small businesses without employees or visiting clients may benefit from a little extra coverage. Examples include home-based bloggers and other content creators.
Commercial Auto Insurance
If a vehicle is used for business activities, personal auto insurance may not cover it in the event of an accident. Business activities can include deliveries, client visits, supply transport, or passenger lifts.
When it is needed: Commercial auto policies or endorsements on existing policies may be needed to cover business activities such as deliveries, client visits, supply transport, or passenger lifts.
Workers’ Compensation Insurance
In Hawai‘i, workers’ compensation insurance is required by law.
When it is needed: All home-based businesses, in which the owner has one or more employees, require workers’ compensation insurance.
Cyber Liability Insurance
Home-based businesses can be vulnerable to data theft, breaches, ransomware, and other attacks, potentially endangering sensitive customer data. Cyber liability insurance covers the costs of applicable mandatory notifications, data theft, and damage to your reputation.
When it is needed: All home-based businesses should consider cyber liability insurance.
Specialty Coverage
Certain industries require special insurance coverage to protect their owners from unique liabilities.
When it is needed: Examples include businesses that handle food products, medicine, personal care items, and more. Local insurance professionals can help business owners figure out what specialty coverage they need.
Important Considerations as a Business in Hawai’i
Home-based businesses anywhere can benefit from business insurance, but those located in Hawai‘i may need special coverage types. For example, Hawai‘i frequently experiences natural disasters such as floods and earthquakes, often leading to increasing premiums for business owners, particularly those ins specific geographic areas.
Before purchasing business insurance in Hawai‘i, owners should first check with a local agent. They’ll also know about local zoning laws, which could impact the viability of home-based businesses in certain areas. While most laws permit non-disruptive businesses, regulations may impact the owner’s insurance needs.
Custom Local Coverage for Home-Based Businesses in Hawai‘i
Home-based businesses often require the same coverage as other types of businesses, including not only general liability but also specialty coverage to protect clients, visitors, employees, and owners from various liabilities. At Atlas Insurance, our team of local agents helps the owners of home-based businesses in Hawai‘i determine their needs and tailor insurance plans that address their individual coverage gaps. Contact us today to learn more about the insurance your home-based business needs to best protect your property, visitors, and reputation.