What You Should Know About Home-Based Businesses and Homeowners Insurance

25 January 2026

Home is where the heart is, but for many, it's also where the hustle happens. With the rise of home-based businesses, from cozy backyard bakeries to booming online stores, the lines between personal and professional have never been blurrier.

But here’s the burning question: Does your homeowners insurance have your back when your business runs from your living room? Or are you unknowingly skating on thin ice? Let’s break it down and find out.

Why Home-Based Businesses Are Booming

The world has changed, and so has the way we work. More and more people are ditching the 9-to-5 grind for the freedom of running businesses from home. Whether you're selling handmade crafts, consulting from your kitchen table, or running an at-home daycare, the perks are endless—no commute, flexible hours, and the comfort of working in pajamas.

But while the freedom is enticing, the risks are real. A single mishap—like a stolen laptop or a client tripping on your doorstep—can leave you drowning in costs if you don’t have the right insurance coverage.

What Homeowners Insurance Covers (And What It Doesn’t)

Many home-business owners assume their standard homeowners insurance policy has their back, but here’s the kicker—it usually doesn’t.

What Your Homeowners Insurance Covers

Most homeowners policies primarily protect your home's structure and personal belongings, covering things like:

- Fire
- Theft
- Certain natural disasters
- Liability for injuries that happen on your property (but only personal, not business-related ones)

What Isn’t Covered

Once business-related risks come into play, your standard policy might fall short. Here’s where the trouble starts:

- Business Equipment: If your laptop, printer, or inventory gets damaged or stolen, your homeowners insurance might not cover the loss.
- Liability Issues: What if a client slips on your icy driveway? Or a customer sues you over a business-related mishap? Your policy likely won’t help.
- Loss of Income: If a fire or flood forces you to stop operations, homeowners insurance won’t cover the lost business revenue.

If your home is pulling double duty as both a sanctuary and a workplace, it's time to rethink your coverage.

Why You Need Additional Coverage

Home-based businesses need extra protection, plain and simple. Without it, you could be one accident away from financial turmoil. Luckily, you have options.

Option 1: Homeowners Insurance Endorsement

If your business is small and relatively low-risk, you might be able to add an endorsement (a fancy word for an add-on) to your existing homeowners policy. This can increase coverage for business equipment and provide limited liability protection.

Best For: Freelancers, consultants, or small-scale businesses with minimal risks.

Option 2: In-Home Business Policy

An in-home business policy is designed specifically for home-based entrepreneurs. It offers better coverage than an endorsement, including higher limits for business equipment, liability protection, and even compensation for lost income if disaster strikes.

Best For: Small businesses with customer interactions, such as tutors, bakers, or e-commerce sellers storing inventory at home.

Option 3: Business Owners Policy (BOP)

A Business Owners Policy is a step up from an in-home business policy. It provides comprehensive coverage, combining property insurance, liability protection, and business interruption insurance.

Best For: Growing businesses or those with higher risks, such as home-based manufacturers, pet groomers, or photographers with expensive equipment.

Common Insurance Mistakes Home-Based Business Owners Make

It’s easy to assume you’re covered when, in reality, you’re exposed to risks. Here are the biggest mistakes people make:

1. Assuming Homeowners Insurance Covers Everything

One of the biggest blunders is thinking homeowners insurance will cover all business-related mishaps. Spoiler alert: It won’t.

2. Underestimating Liability Risks

Just because your business operates from home doesn’t mean you’re immune to lawsuits. A single accident could lead to hefty legal bills.

3. Not Updating Your Policy As Your Business Grows

What started as a side hustle might now be a full-fledged operation. If your revenue, equipment, or risks have increased, your coverage needs to grow with it.

4. Ignoring Cybersecurity Risks

If you store customer data, conduct financial transactions, or run an e-commerce store, cyber threats are real. Cyber liability insurance can save you from potential nightmares like data breaches or fraud.

How to Choose the Right Insurance for Your Home-Based Business

Selecting the right insurance is like picking the perfect home—it has to fit your needs. Here’s how to nail it:

Step 1: Assess Your Risks

What kind of business do you run? Do you have expensive equipment? Do customers visit your home? These factors determine the level of coverage you need.

Step 2: Talk to an Insurance Agent

Insurance isn’t one-size-fits-all. Chat with an expert who can guide you toward the best policy for your business.

Step 3: Compare Policies and Costs

Different providers offer different coverage options and pricing. Don’t just settle—shop around for the best deal.

Step 4: Read the Fine Print

Know exactly what is and isn’t covered so there are no unpleasant surprises down the road.

Final Thoughts

Running a home-based business is exciting, but don’t let insurance be an afterthought. The last thing you want is to be blindsided by an unexpected loss or lawsuit.

Think of the right insurance coverage as the sturdy foundation of your entrepreneurial dream—it keeps everything standing strong, no matter what storms come your way.

So, if your home doubles as your workplace, take a moment to check your coverage. Your future self will thank you.