2/24/15 – Home-Based Businesses at Risk of Costly Insurance Surprises



New Insure U tips and tools help entrepreneurs identify coverage gaps
between personal and commercial insurance

WASHINGTON, D.C. (Feb. 24, 2015) – For many, achieving the American dream comes with the
freedom of operating a home-based business. More than half of the 28
million small businesses in the U.S. are home-based.1 In fact,
59 percent of businesses in operation for more than three and a half years
operate from the owner’s primary residence.2 But without proper
insurance planning, even the most promising home-based business dream can
quickly turn into a nightmare. The National Association of Insurance
Commissioners (NAIC) encourages home-based business owners to visit the Insure U for
Small Business
website channel to get smart about business insurance
early to avoid costly misunderstandings later.

“Many home-based entrepreneurs incorrectly
assume their business assets are covered by personal insurance policies,”
said NAIC President Monica Lindeen and Montana Commissioner of Securities
and Insurance. “Unfortunately, business owners often don’t discover this
mistake until after a major incident puts their business and personal
finances at risk. When it comes to insurance, what you don’t know
definitely can hurt you.”

Blurring the lines between home and work can
have unexpected and costly impacts on all types of personal insurance. To
help entrepreneurs get focused, the NAIC developed Get Ready resources for
home-based business owners. The resource kit includes tips and tools, such
as Five
Tough Questions to Ask
and a Take
Action Now
checklist for small business owners.

Consider the following personal insurance
implications of a home-based business:

  • HOME. Homeowners’ or
    renters’ insurance policies are rarely adequate for business needs.
    Owners may want to investigate a business owners’ policy or general
    liability, business property and business interruption/continuation
  • AUTO. If you own or lease
    a vehicle almost exclusively for business use, list the business name
    as the principal insured. Also consider increasing coverage to protect
    permanently attached items such as a generator or storage unit.
  • HEALTH. There are a variety
    of sources for purchasing HMOs, PPOs, EPOs and other popular health
    insurance plans at group rates. Under the Patient Protection and
    Affordable Care Act (ACA), business owners and the self-employed who
    purchase coverage through new health insurance
    may qualify for tax credits.
  • LIFE. If the home business
    is a partnership, consider key person life insurance which names each
    partner in a business as beneficiary on the other partner’s policy. If
    one partner dies, the other can use funds to buy out heirs, pay off
    loans or continue operations.

For more tips and tools to help consumers
navigate complex insurance issues associated with home-based and other
small businesses, visit www.InsureUOnline.org/smallbusiness.
Consumers interested in insurance information specific to where they live
can find their state insurance department here.

Audio: Lindeen
Discusses Insure U for Small Business

1 U.S. Census, Small Business Administration (SBA)
2Global Entrepreneurship Monitor 2012 United States Report
(Babson College)

About the NAIC

The National Association of Insurance
Commissioners (NAIC) is the U.S. standard-setting and regulatory support
organization created and governed by the chief insurance regulators from
the 50 states, the District of Columbia and five U.S. territories. Through
the NAIC, state insurance regulators establish standards and best
practices, conduct peer review, and coordinate their regulatory oversight.
NAIC staff supports these efforts and represents the collective views of
state regulators domestically and internationally. NAIC members, together
with the central resources of the NAIC, form the national system of
state-based insurance regulation in the U.S. For more information, visit www.naic.org.

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