Insurance: a Home Business Owner's Catch-22
           ...What do you really need?

If we were to anonymously poll every home-based business 
owner today, we would probably run into a common off-the-
record confession — They don't have the insurance coverage 
they should have.

Why?

Most are too strapped for funds or assume their homeowner's 
insurance policy will cover any problems that could arise.  

While erroneous thinking, it is, nevertheless, something 
with which most of us can relate.  After all, we're all in a 
similar boat.  We don't have unlimited funds or big venture 
capital backers.  Often, we are the sum and total of our home 
office staff.  As such, we view insurance as a luxury to 
consider well down the road.

Starting with little capital and keeping expenses low is one 
of the major things that distinguishes us small, home-based 
entrepreneurs from big business.  Most home-basers simply 
aren't interested in every type of insurance available to 
them.

But insurance is one of those catch-22's that home-based 
business owners are forced to face.  It could cripple us if 
we have too much and cripple us if we have too little.

Making insurance an integral part of your business plan is a 
necessary evil, and I suggest you do it early on.

If you must make some insurance sacrifices, first and 
foremost, you should not compromise your family's or your 
own safety, nor should you put your business' ability to 
expand at risk.  

Piece of mind should always be factored into your plan.  I 
know from personal experience that when you cut to a point 
where you lose your piece of mind, it can have debilitating 
effects on your performance in your business.  Be sure basic 
family insurance needs, like health insurance, are already in 
place before starting up.  You may have to keep a job with 
insurance benefits for a period while you make the 
transition, or you may have insurance through your spouse.  
As you build your business and your cash flow increases, then 
consider adding other coverage.

The trick to deciding what coverage you actually need is to 
weigh the risk factors.  For example, would it be cheaper to 
take a higher deductible or would it be cheaper to simply 
replace your property?  It can be a sensitive balance.  Does 
the risk outweigh the security?  The recovery cost?

While, historically, it's been tough for home-based business 
owners to find health, property-casualty and disability 
coverage, things are changing.  Some insurers have loosened 
policy restrictions, and some are aggressively promoting 
their products to the growing home-based market.

With this in mind, here are some thoughts on specific 
insurance options.

1)  Home or Rental Insurance
Check your home or rental insurance policy.  Does it cover 
your business assets?  Make sure you know exactly what 
it does and does not cover.  Be sure to get it in writing as 
it could come back to bite you later in the event of a 
crisis.  If you are still unclear, get a professional to 
explain it to you clearly.  Purchasing additional business 
insurance may or may not actually give you extra coverage.

One option for people working at home is to buy an "in-home 
business" insurance policy. Unlike simple homeowner's 
insurance, these policies cover more than just property 
damage that affects equipment or inventory used in your 
business. An in-home business policy can go further, 
providing compensation for lost business that may result 
from property damage. In-home business policies also 
typically include general liability coverage.

The CCH Business Owner's ToolKit offers a nice article 
"Insuring Your Office and Equipment," at this URL:
http://www.toolkit.cch.com/text/p04_8100.asp

2)  Liability Insurance
At the beginning stages of your home-based business, I 
wouldn't worry too much about purchasing liability insurance.  
An exception to this would be if you are providing a critical 
service to people or companies.  For example, if you are 
providing internet access and your systems crash, you could 
find yourself in the middle of a lawsuit depending on your 
client and the damage it caused them.

I do feel strongly that liability insurance is something you 
should add to your business when you are financially able.  
It's one of those things that is usually not necessary when 
first starting on a tight budget.  Going without liability 
insurance is somewhat of a gamble.  Ask yourself, "How 
collectible am I?"  It's simply not worth the time and money 
to sue if there is nothing substantial on which to collect.  
That probably describes most home-based owners.

Here are some places online to begin your research on 
liability insurance:
http://dtonline.com/pfa/liability.htm
The following resource is for the State of Wisconsin but 
offers some good information:
http://badger.state.wi.us/agencies/oci/pub_list/pi-045.htm

3)  Disability Insurance
This is one of the benefits you give up when you become self-
employed.  Employers legally must cover their employees for 
injuries through Worker's Compensation.  While you may not 
have to as a self-employed, home-based business owner, you 
may want to consider purchasing some down the road.  As your 
home-based income becomes your livelihood, even a small 
injury could lay you up, unable to work regular hours.  Since 
you are your business, your business earnings could seriously 
suffer.

Here's an interesting article about disability insurance:
http://abcsmallbiz.com/bizbasics/disability_ins.html

4)  Health Insurance
Paying for healthcare out your own pocket is very expensive. 
Self-employed people often experience sticker shock at 
health insurance.  Unfortunately, however, health insurance 
is one of those things that too many home-based business 
owners scrimp on.  One accident or disease that prevents you 
from being able to work could wipe out everything you have 
built up.  Bad idea.  A better idea is to maintain insurance 
through a spouse or to moonlight with a day or night job 
until you can afford to buy your own health insurance.

Try to take advantage of employer-supplied benefits before 
you or your spouse quits his or her job.  Get everything 
fixed — teeth, eyes, glasses, medical check-ups.  Use any 
employer-supplied benefits while you can, and get it all done
early enough so that you are reimbursed before you leave the 
company.

After you leave employment, you may want to consider 
maintaining your existing insurance through your previous 
employer using a COBRA plan.  Even COBRA plans from your 
employer probably offer a better deal than shopping around as 
an individual.  Though your rate won't be subsidized as an 
employee's would be, a large company's buying power can still 
help shelter you from even higher rates.

5) Car Insurance
Working at home makes your commute wonderful — 10 seconds 
flat from your bedroom to your office.  Assuming that your 
business does not require a lot of driving and that you will 
be using your car a lot less, ask your insurance provider if 
they will lower your premiums.

6) Other Types of Insurance
New insurances are popping up to satisfy the growing small 
business market needs.  One is called "business interruption 
coverage," which indemnifies for the loss of profits and 
continuing fixed expenses when a disaster prevents your 
business from being carried on.  This is an insurance you 
may want to think about down the road as your business grows 
and becomes your only source of income.  The "extra expense 
clause" is a good one for home-based owners as it would 
cover extra expenses incurred as the business owner attempts 
to continue to operate his or her business after a disaster, 
i.e. short-term leased office space outside the home, 
equipment, and other costs that could create a cash flow crunch.

If you consult to high-end types of businesses, you might 
want to consider "intellectual property protection."  This 
could save you from accusations by outsiders of infringement 
or when outsiders improperly use your company's ideas.  
"Breach-of-security coverage" protects against losses from 
unauthorized electronic access (typically by hackers). These 
kinds of insurances can be pricey.

7) Where to Look
The best place to start looking is with the company that 
already provides your homeowner's/renter's policy.  Some 
insurers will extend home coverage to your home business.  
That's what our insurer did for us.  Generally, there's an 
additional fee, but it's usually quite low.  It's a very 
simple thing to do, but be sure to get it in writing.  

Another way of getting into insurance of any kind is to join 
a home business association.  There are half a dozen good 
organizations that offer insurance as a membership benefit.  
Keep in mind that good rates are not the only consideration 
when selecting a provider.  Quality customer service and 
track records are equally important.  There's nothing more 
frustrating than trying to get service when you're in the 
middle of a crisis.

Some home-based businesses are able to get insurance better 
than others.  Insurance companies may be selective.  If your 
home business involves lots of visits from customers or 
suppliers, it may be viewed as risky.  Just keep shopping — 
what one company may deny another will approve.

If you use an insurance agent to shop around for the best 
rates on any type of insurance policy, that's great.  Just 
be sure to do your own due diligence.  Ultimately, you are 
responsible for your own insurance, and it is an important 
part of understanding your business.

Add new insurance only as your business and your cash flow 
grows.  Insurance shouldn't cripple you, but not having what 
you need shouldn't either.

------
Note: You have permission to reprint this article in its 
entirety with the author's credits below.

Heidi Perry, the author of this article and a successful 
entrepreneur, is editor of HomeBizBytes and co-founder of 
HomeBusinessOnline.com.  Sign up for her popular newsletter at 
http://www.HomeBusinessOnline.com/nsl.htm?hbb


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              Tip of the Day
_________________________________________

    Take Inventory of Your Home Office Assets 
             With Your Camcorder
 
Not long ago, Dave and I went through our home office with a 
fine tooth comb and filmed every piece of equipment, wiring, 
software, books, supplies and inventory.

You never know when you might need to make an insurance 
claim.  Things just happen.  It's a fact of life, so be 
ready.  PC's, printers, scanners, copiers and other office 
equipment can take a good chunk of your business if stolen 
or ruined in a disaster.  Considering the investment, it's 
especially important for those of us with home offices.

So make a list and take a few pictures or a videotape of 
what you own and then keep the record offsite, i.e. in a 
safe-deposit box or other family member's home.  After all, 
it won't do you much good if your videotape is burned in a 
fire along with your equipment.

-----
If you have a unique tip you'd like to share, I'll post it 
here with your credits.  Email your tips to me at
mailto:Editor@HomeBusinessOnline.com

_________________________________________

     Featured Home-based Entrepreneur
_________________________________________

Jerry Martin
The Rubber Stamp Shop

You never know what life will deal to you.  Jerry Martin was 
dealt an especially hard blow.  Read how he made lemonade 
out of this especially sour lemon.  By the way, thanks Jerry 
for sending in your inspiring story for all of us.

--- quoting Jerry ---
"I was a Senior Officer in a prominent bank in Arkansas in 
1993, when my 23 daughter was critically injured in the Air 
Force at Andrews Air Force Base.  She was hospitalized for 15 
months and would require 24 hour care for the rest of her 
life.  I had to find a way to make a living and stay home to
assist with 24 hour care.  

Long story short, I bought a used Co2 laser, hooked it up to 
my computer, and started making rubber stamps.  The business 
has worked wonderfully, stamps aren't time critical, can be 
made when my daughter and wife don't need me.  They are 
relatively high profit and every business large or small uses 
them.  All my business is thru a fax machine [and the 
internet], no retail customers coming in our home.  In 1999 I 
sold $90,000 worth of products produced with the laser, 
either self inking stamps or other engravable products, i.e. 
name tags, desk plates, etc.  My cost of goods sold is less 
than 30%, and my overhead is nil because I operated it at 
home.  Just bought my second laser to double my capacity."
---
Since then, Jerry has been sold on doing business at home.  
If you're interested in Jerry's business, he would like to 
help people who find themselves in a tough situation, like 
himself, to learn to make a living doing a rubber stamp/
engraving business.

You can find Jerry at
mailto:homebiz@iso.net
http://homebizexpert.com

__________________________________________

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---
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  appreciate the valuable information it delivers.

  I myself devote a majority of my free time to my internet 
  ventures and value an ezine that delivers useful 
  information to help me along the way."

  Ray Asadi 
  M.R.A. Marketing

---
Send your feedback to me and I'll post it here with 
your links.
mailto:Editor@HomeBusinessOnline.com

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Editor@HomeBusinessOnline.com

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