How do you plan on protecting your personal assets if one of your clients gets injured, you damage somebody’s property, or you get in a car accident while on the job? If your answer is your personal umbrella, homeowner’s, or car insurance, you may not have any protection at all. Keep reading to learn why and what you need to do.
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Personal Insurance Policies Exclude Business Activities
Most people have personal liability coverage from a homeowner’s or renter’s insurance policy. If you have a high income or high net worth, you might have extended this with an umbrella liability policy. And, of course, if you have a car, you almost surely have at least the minimum car insurance coverage.
The problem is that virtually all of these policies have commercial exclusions. While you might have coverage in your day-to-day life, the coverage turns off whenever you’re engaged in business.
Personal Liability Policies are Personal
Personal liability coverage from your homeowner’s, renter’s, or umbrella policy generally covers personal acts. These policies cover things ranging from you accidentally knocking a little old lady over to your dog biting someone to someone slipping and falling on your icy sidewalk. However, if something happens to a business client or while you’re doing a business activity, you generally won’t have coverage for it even if it’s normally covered.
Standard Car Insurance Doesn’t Cover Commercial Use
Personal car insurance will typically only cover personal driving. That means driving for personal errands and leisure as well as commuting. Once your car becomes the company car, you need separate commercial car insurance.
The distinction between personal commuting and commercial use is a gray area that can vary based on your policy language. If you’re generally driving to a fixed job site with occasional side trips, like an employee, it likely falls under commuting. However, if you’re transporting customers or hauling equipment between multiple job sites each day, that will likely fall under commercial.
Personal Property Coverage is for Personal Belongings
Depending on your insurance policy, you may or may not have a small amount of business property coverage. The general idea is that insurers may cover a little business property that you happened to have with you out of convenience. They typically won’t provide full coverage for all your tools and equipment. Again, this will vary based on the specifics of your policy.
What Business Insurance Coverage Do You Need?
There are generally four types of business coverage that you’ll need to consider purchasing.
- Commercial general liability coverage for things like accidental property damage, clients slipping on your office floor, or injuries you cause to passersby while working.
- Professional liability/malpractice/errors and omissions coverage for actions directly related to your business judgment and skill. This includes things like a doctors’ mistake during surgery or a lawyer leaving something out of a contract.
- Business property coverage to protect your tools, equipment, business vehicles, and commercial buildings against theft, fires, and other damage.
- Commercial auto insurance to give you both liability and comprehensive/collision coverage if you’re involved in an accident while driving for business purposes.
To learn more about what kinds of coverage you need, what limits you need, and whether your personal insurance provides any protection, talk to your insurance agent or check out Do You Need Insurance? One popular company that you may want to consider using is Hiscox.
Insurance policies vary by issuer. Some states may have laws requiring insurers to include or exclude certain things from their policies.