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Home-based Business Insurance: Do I Need a Commercial Policy or a Residential Package?

Home-based business

If you operate a small business from your home, you may be able to insure your business with a home-based business package. The package is added to your existing residential policy and covers contents used for your business, loss of income, liability for the business operations, as well as other associated items.

However, working from an office space in your home does not automatically mean your business would qualify as a home-based business, for insurance purposes. The following are examples of situations that would require a business to be covered by a commercial insurance policy. They are representative of the underwriting guidelines of SE Mutual Insurance.

More than one non-residence employee

The business being insured must be operated out of the principal residence of the business owner. If your business employs more than one person who does not live in your home, it would need to be insured on a commercial policy.

Gross annual revenue over $100,000

When your business exceeds $100,000 in annual revenue, it requires a commercial policy.

More than 25% of the home is for business use

To qualify as a home-based business, your home must qualify for homeowners, tenants, or condominium policy coverage and no more than 25% of the entire living area can be devoted to business use.

More than $30,000 in business property

The maximum property value for a home-based business package is $30,000. If your business property exceeds this amount, you would require a commercial insurance policy.

Numbered company

To qualify for a home-based business package, the company must be in the same name as the named insured on the residential policy. Numbered companies require a commercial policy. However, a home-based business package can be purchased under an insured’s name and “operating as”. For example: “John Smith O/A Artist’s Loft.

In addition to the situations noted above, a home-based business will require a commercial policy when:

  • The owner attends more than 12 trade shows or fairs per year
  • The owner performs more than 50 home demonstrations or personal service calls per year
  • The business is not one of the types listed in the insurer’s eligibility table

Unsure if your business qualifies for a home-based business package? Contact your agent, broker, or insurer for clarification.

Learn how to save money on your home insurance.

This article is intended for informational purposes only. It is recommended that you speak with your Agent, Broker or Insurer for accurate information pertaining to your specific insurance policy and/or individual insurance needs.

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