How to Insure a Home-Based Business

Learn what insurance coverage your home business needs and how to get it without overpaying or leaving gaps.

  1. Check what your homeowners policy actually covers. Call your homeowners insurance company and ask specifically about business equipment and liability. Most policies exclude business activities entirely, but some cover up to $2,500 in business equipment. Get this answer in writing before assuming you're covered.
  2. Identify your specific business risks. List what could go wrong: client injuries on your property, damage to expensive equipment, data breaches, or professional mistakes. A freelance writer faces different risks than someone running a dog grooming business from home. Your risk profile determines what coverage you actually need.
  3. Price business owner's policy versus separate coverages. Get quotes for a Business Owner's Policy (BOP) that bundles general liability and property coverage. Also price these coverages separately plus any add-ons like cyber liability or professional liability. BOPs typically cost $500-$1,500 annually for low-risk home businesses as of 2026.
  4. Calculate coverage limits based on your assets. Set liability limits at least equal to your net worth — if you have $100,000 in assets, carry at least $100,000 in coverage. For equipment coverage, add up the replacement cost of computers, tools, and inventory. Don't insure items worth less than your deductible.
  5. Consider professional liability if you give advice. If clients pay you for expertise, recommendations, or professional services, add professional liability (errors and omissions) coverage. This covers lawsuits claiming your advice caused financial harm. Coverage typically starts around $200-$400 annually for $1 million limits.
  6. Review and adjust coverage annually. Update your coverage when you buy expensive equipment, increase revenue significantly, or change business activities. Most insurers require notification of major business changes anyway. Cancel coverage you no longer need rather than letting it auto-renew.