Standard homeowners insurance covers your home but provides very limited — often zero — coverage for business activities conducted there. Business property (equipment, inventory) and business liability are typically either capped at a low sublimit or excluded entirely. Home-based business owners need a separate policy or a specific endorsement to fill that gap.
More than 50% of small businesses in the U.S. are home-based, according to SBA data. The vast majority of homeowners policies were not designed with business activity in mind — and insurers treat undisclosed home businesses as an underwriting concern. The Insurance Information Institute identifies three coverage gaps home-based business owners commonly discover after a loss.
A standard homeowners policy covers personal property (Coverage C) — but most policies cap coverage for business property at the premises at $2,500 and coverage for business property off-premises (e.g., at a client's site) at $500. If you have significant business equipment — computers, cameras, medical devices, instruments — that cap is likely far below replacement cost. A separate commercial property policy or an in-home business endorsement raises that limit to reflect actual business asset values.
Homeowners policies exclude claims arising from business activity at the home — a client who is injured visiting your home office for a meeting, for example, may not be covered under your homeowners liability because the loss arose from a business activity. The III notes that this distinction — personal activity vs. business activity — is exactly where homeowners policies draw the line, often leaving business-activity injuries entirely uncovered.
Homeowners insurance has no business income (business interruption) component. If a fire damages your home office and you can't operate for three weeks, your homeowners policy pays for home repairs — but replaces none of your lost business revenue. A home-based business policy adds business income coverage that replaces lost income during the recovery period.
If your insurer discovers you're running a business from home that you didn't disclose during underwriting, they may have grounds to rescind the policy or deny unrelated claims. Disclose your business activity to your homeowners insurer — and get the appropriate coverage added or replaced. ClearValue Lending is not a licensed insurance broker or agent. A licensed agent can help you evaluate which option fits your situation.
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