Insuring Your Office

Regardless of the size and scope of your business, a periodic review of your coverage makes good sense.
Insuring Your Office
Judy Kneiszel

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There are several possible scenarios for what “back at the office” means to the operator of a plumbing company. Maybe your entire business has a different address than your home. That means you park the trucks, store your equipment and sit at a computer to process the payroll at a different address than where you eat dinner, watch NCIS and sleep. 

Or maybe your office is actually in your home, in a spare bedroom or corner of the basement. A third option is that your office is in a building you own that’s separate from your home, but on the same property. This, I recently learned, makes insuring it a bit tricky. 

When a home office isn’t in a house

If your business office is in your home, it may be covered by your homeowner’s insurance. Some insurance companies offer business coverage as part of a homeowner’s policy, while others may require the purchase of separate coverage. Check with your agent if you’ve recently started the business, moved the business office to your home, or just assumed your home office was covered but never thought to ask. 

In my case, my husband and I added a separate building in our home’s backyard that serves as an office. We found the insurance that protected our office equipment from fire or burst water pipes as part of our business liability policy when we rented an office a few blocks away didn’t cover the same equipment in our new building, or the building itself. We wondered if our homeowner’s insurance covered the building and its contents, just like it would cover a garden shed and the tools inside it. 

While most homeowner policies automatically cover other structures on the premises, that coverage may not extend to a structure used to operate a business. We needed a commercial insurance policy on the new office outbuilding, despite the fact that it does have a separate storage room for rakes and shovels.  

Solutions vary from company to company

As more and more people telecommute or run home-based businesses, insurance companies have had to come up with solutions for various home office scenarios. In our case, a commercial policy combining business liability and coverage of the building and its contents was drawn up. A rider was added for some business-related equipment occasionally used off site. 

Here are some factors an astute insurance agent will consider before quoting a premium if you have a business facility on your property, but not in your home: 

What is the replacement cost for both the structure and contents of your office building? You want to determine the full replacement value. This is the total amount it would cost to rebuild and equip the building at today’s costs. This is determined using a dollars-per-square-foot rate set by the insurance industry for your geographic area. The estimate your agent comes up with may seem high, but consider that construction costs are always rising, and if the building was destroyed you may have to rent space somewhere else temporarily to keep the business going during reconstruction. 

List all equipment and furniture in the building. Some insurance companies require detailed information including serial numbers and replacement value for equipment you want insured. 

Who uses the building? Do customers come to your office, or is it just a quiet place you go to do the books? Do you have employees who use the facility? Liability insurance may be higher if others use the building. 

How is the building heated? Using a wood or pellet stove to heat an outbuilding can increase premiums. 

Reminders for all small-business owners

If you have insurance with two different companies for your home and business, check to make sure there is no overlapping coverage or gaps in coverage. You may think one policy is covering something that neither policy is actually covering. 

Sometimes having all your insurance eggs in one basket can save you money, but this is not always the case. Shop around, but don’t assume the best option is always the insurance policy with the lowest premium. A lower premium can mean a lack of needed coverage. Don’t wait until after disaster strikes to learn you weren’t covered for that particular disaster. 

When comparing insurance bids from two companies, be sure you are comparing apples to apples and getting adequate coverage for your dollar. If you want to save money on premiums, consider taking on higher deductibles rather than reduced coverage. Insurance on your business is meant to protect you from catastrophic loss. Having a $500 deductible and filing a claim for a $1,000 roof repair after a storm may ultimately raise your rates and cost you more money than the payout you receive. It may be wise and save money in the long run to choose a policy with a higher deductible. 

The best way to make sure you have the right insurance — and enough insurance — without paying too much is to meet with your agent at least once a year and, painful as it can be, read your policies and know what’s in them.


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