The home is no longer just where the heart is, it’s also where the business is. From Etsy shops and photography studios to freelance graphic design and bookkeeping services, home-based businesses are more popular than ever.
But here’s what many entrepreneurs don’t realize: your homeowners or renters’ insurance likely won’t cover your business.
At Crain Insurance Group, we love supporting entrepreneurs, and that starts with making sure you’re properly protected. Whether you’re running a side hustle or a full-time operation from your spare bedroom, it’s essential to understand what kind of insurance you need and why.
In this post, we’re breaking down exactly why standard home policies fall short, what types of coverage home-based business owners should consider, and how to protect the dream you’re building, before something unexpected happens.
What Is a Home-Based Business?
A home-based business is any commercial activity operated primarily out of your residence. It can be full-time, part-time, seasonal, or something you’re growing on evenings and weekends.
Some common examples include:
- Freelancers (writers, designers, developers, etc.)
- Online sellers (Etsy, Amazon, Shopify)
- Photographers and videographers
- Consultants and virtual assistants
- Tutors or educators
- Bakers and caterers
- Crafters and handmade product sellers
- Hairstylists, estheticians, or massage therapists
- Notaries and tax preparers
Even if you think of your business as “small,” it still creates risk, and most personal insurance policies aren’t built to handle it.
Will My Homeowners Policy Cover My Business?
In most cases, the answer is no, or only very minimally.
Homeowners (and renters) insurance is designed to cover your personal belongings, not commercial property. Most policies include limited business property coverage, usually $2,500–$5,000, and may not cover business liability at all.
That means:
- If your laptop, inventory, or equipment is stolen or damaged, it may not be covered.
- If a client slips and falls in your home office, your liability coverage may not apply.
- If you’re sued for professional negligence or an error in your work, your personal policy won’t protect you.
In short: relying solely on your home insurance can leave your business, and your personal finances, wide open to risk.
Why Home-Based Business Insurance Matters
Insurance isn’t just for big corporations. Even the smallest businesses face real risks:
Property Loss
What happens if a fire destroys your home office, product inventory, or computer equipment? Can you afford to replace everything, and recover lost income?
Lawsuits & Liability
What if a client sues you for a missed deadline? Or a neighbor is injured picking up an order? Liability claims are unpredictable, and expensive.
Inventory Protection
Whether it’s handmade candles or bulk skincare products, your business inventory has value. Most home policies don’t cover it.
Service Errors
If your work causes a client financial loss, even unintentionally, you could be held liable.
A well-designed insurance plan protects against these risks so you can focus on building your business, not worrying about what could go wrong.
Types of Insurance Coverage for Home-Based Businesses
Let’s walk through the most important types of coverage for home-based business owners:
Business Property Coverage
Your homeowner’s policy might offer $2,500 in business property coverage, but for many entrepreneurs, that’s not enough.
If you use a computer, camera, tools, or inventory to run your business, you may need to increase your limits or purchase a dedicated business policy.
This protects against:
- Theft
- Fire and smoke damage
- Vandalism
- Certain weather events
You can usually add a business property endorsement to your home policy or opt for a standalone in-home business policy with broader coverage.
General Liability Insurance
This is one of the most important types of protection for any business.
General liability covers:
- Bodily injury (e.g., someone slips and falls on your property)
- Property damage (e.g., you accidentally damage a client’s belongings)
- Legal defense and settlements related to claims
If you meet with clients in your home, or provide products or services to the public, this coverage is essential.
Even a friend stopping by to pick up a cake, consultation, or delivery could trigger a claim if they’re injured on your property.
Professional Liability Insurance (Errors & Omissions)
This covers you in case a client claims you made a mistake, missed a deadline, or provided faulty advice that costs them money.
It’s especially important for:
- Consultants
- Designers
- Accountants
- Coaches
- Legal or financial professionals
If your business involves giving guidance or delivering professional services, this is a must-have.
Business Interruption Coverage
Also known as business income insurance, this coverage reimburses lost income if your business is temporarily shut down due to a covered event (like a fire or storm).
Example: A burst pipe floods your home office. You can’t operate for a few weeks. Business interruption coverage can help make up for lost revenue during that downtime.
Product Liability Insurance
Do you make or sell physical goods? You could be held liable if someone is injured by a product you created, even if it wasn’t your fault.
This applies to:
- Food and baked goods
- Beauty and skincare products
- Jewelry or crafts
- Toys, tools, and household items
Even a minor allergic reaction or product defect could trigger a claim. Product liability protects your business from the financial fallout.
Cyber Liability Insurance
If you collect customer data, process payments online, or store sensitive information, cyber liability insurance is worth considering.
This covers:
- Data breaches
- Hacking incidents
- Customer notification costs
- Legal defense and fines
- Credit monitoring services
In today’s digital world, cyber threats are real, and small businesses are often targeted because they’re less protected.
Commercial Auto Insurance
Do you use your personal car to:
- Make deliveries?
- Transport supplies?
- Visit clients or job sites?
Your personal auto policy likely excludes business use. If you’re in an accident while driving for work, you may not be covered.
You may need a commercial auto policy or a business-use endorsement to bridge that gap.
Workers’ Compensation (If You Have Employees)
If your home-based business has even one employee, full-time or part-time, you may be legally required to carry workers’ comp.
It covers:
- Medical expenses for on-the-job injuries
- Lost wages
- Legal protection
Even a friend helping with packaging or deliveries could be considered an employee under the law.
Insurance Options for Different Home Business Sizes
Depending on how big your business is, you have a few options:
For Small Side Hustles:
You might be able to add endorsements to your homeowner’s policy for business equipment or liability. It’s a budget-friendly way to start.
For Growing Home Businesses:
Consider an in-home business policy. It offers broader protection than homeowners’ coverage, including liability and business interruption.
For Full-Time Entrepreneurs or Multi-Employee Operations:
You may need a Business Owner’s Policy (BOP), a bundled plan that includes property, liability, and business income protection.
What Can Happen If You Don’t Have the Right Coverage?
Let’s say you run a candle-making business from home. One day, a customer claims their candle exploded and damaged their countertop. They sue you for $5,000 in damages.
If you don’t have product liability coverage, your homeowner’s policy likely won’t respond, and you’ll be stuck paying out-of-pocket.
Or maybe you host a client in your home office. They trip on a rug and fracture their wrist. Without general liability, that lawsuit is on you.
The financial impact of a single uncovered incident can shut down a small business, or cause major personal financial strain.
How Much Does Home-Based Business Insurance Cost?
The good news? Coverage is more affordable than most people expect.
- Business endorsements: $25–$100/year (added to home policy)
- In-home business policy: $250–$500/year
- BOPs: Starting around $500/year, depending on size and industry
- Professional liability: Typically, $300–$600/year
- Cyber coverage: Often under $200/year for small businesses
At Crain Insurance Group, we shop across multiple carriers to find the right protection at the right price, for where your business is today and where it’s going tomorrow.
Final Thoughts: Your Business Deserves Real Protection
You’ve put time, money, and passion into building your business. Don’t let one unexpected event wipe it all away.
Whether you’re just getting started or scaling up, having the right insurance helps you run your business with confidence, not fear. And the best part? You don’t have to figure it all out alone.
At Crain Insurance Group, we specialize in protecting small businesses, including the ones operating out of spare rooms, garages, and kitchen counters. Let’s create a coverage plan that fits your budget, matches your business, and grows with you.
Disclaimer: The information provided in this post is for general recommendation purposes only. Please consult with your own licensed insurance agent for advice specific to your situation. Insurance can vary by state. If you don’t have a trusted agent, we’re happy to assist with quotes and guidance.