What Insurance Do You Need if You Work From Home?

Does Homeowners Insurance Cover Working From Home?

A standard homeowners insurance policy often provides some protection for business equipment, but the limit is typically low—usually around $2,500—and it only applies to equipment. It doesn't usually provide liability coverage for work-related activities, protect you against claims for mistakes you might make or safeguard you from other risks that could arise when working out of your home.

If you're a full-time employee and your employer allows you to work remotely, your homeowners insurance coverage may be sufficient—especially if your employer's insurance covers you while working from home. However, if you're self-employed or operate a side business out of your home, homeowners insurance probably won't provide enough protection. You'll likely need to purchase business insurance to get adequate coverage.

Tip: If you have a hybrid work arrangement or your employer allows you to telecommute, it's a good idea to find out what types of insurance they have and whether their policies cover you at home.

Learn more: What Does Homeowners Insurance Cover?

What Insurance Do You Need if You Work From Home?

The types of insurance you need depend on the kind of work you do. Here's a list of common coverages that can help protect independent contractors, solopreneurs and small business owners who work from home.

Homeowners Policy Endorsement

Adding an endorsement to your homeowners insurance can increase the policy's limit for business equipment up to $10,000, depending on the insurer. If you're a one-person operation with minimal equipment, such as a laptop, phone, internet connection and printer, that may be enough. However, it only covers your business equipment; it doesn't provide liability protection.

You may also be able to add a liability endorsement if you have a low-risk business with minimal foot traffic, such as a marketing consultant who conducts most of their meetings through video conferencing services. If your insurance company doesn't offer that option or you routinely see clients in your home, a business-specific liability policy may be a better bet (more on that below).

General Liability

General liability insurance covers third-party bodily injury, property damage and personal injury claims, including slander, libel and advertising injury. This type of insurance covers the cost to defend you in a lawsuit and damages (up to the policy limit) if someone sues you.

Example: If a client arrives at your home for a meeting, slips and falls on your icy steps and sues you because of the injuries they sustain, your general liability policy would typically kick in.

Commercial Property

Commercial property insurance pays to replace business equipment and inventory if it's stolen or damaged. It may also include business interruption coverage, which can help pay your business expenses and cover lost income if you have to temporarily halt your operations due to a covered event.

Tip: If your commercial property policy doesn't automatically include business interruption coverage, you can often purchase it as an endorsement for added protection.

Business Owner's Policy (BOP)

Many insurers offer business owner's policies, which combine general liability, commercial property and business interruption coverage into a single policy. Purchasing a BOP often costs less than buying separate policies.

Professional Liability Insurance

Professional liability insurance helps protect you against claims that your actions resulted in a financial loss for your clients. With a few exceptions, it doesn't typically cover bodily injury or property damage claims. Instead, it kicks in if your client sues you for negligence, making a mistake, delivering substandard work and similar acts.

So, if you miss a deadline that costs your client hundreds of thousands of dollars and they sue you, this type of coverage would typically kick in.

Tip: Even if a claim turns out to be unfounded, having professional liability insurance may be worth it because it helps cover the cost to defend yourself against potential lawsuits.

Commercial Auto

Your personal auto insurance policy typically doesn't protect you if you use your vehicle for business-related activities. If you have a work vehicle or often use your personal vehicle for business activities, such as making deliveries or visiting clients, a commercial auto insurance policy may be worth considering.

Workers' Compensation

Workers' compensation coverage helps pay your employees' medical bills and lost wages if they get hurt or sick on the job. Most businesses that have at least a few employees are required by law to purchase this type of coverage.

If you're a sole proprietor or independent contractor, you generally don't have to maintain this coverage. However, depending on the type of work you do, your clients may require it, and even if they don't, it may be a good idea to buy coverage to have protection for work-related illnesses and injuries.

Tip: Workers' compensation laws vary by state. Check the laws where you live to find out whether you need to maintain this type of coverage.

Cyber Liability Insurance

More than 3,000 data breaches resulting in 1.35 billion victim notices occurred in the United States in 2024, according to the Identity Theft Resource Center. It only takes one incident for sensitive client information to fall into the wrong hands.

Cyber liability insurance helps protect your business if you're the victim of a cyberattack, ransomware demand, data breach and other cybersecurity incident.

Tip: No matter what type of insurance you purchase, it's crucial to read your policy carefully to understand what is and isn't covered. Pay special attention to the exclusions section so you're not caught off guard if you need to file a claim.

Learn more: What Is Cybersecurity?

How to Save on Home-Based Business Insurance

Having adequate insurance can help protect your business from future losses, but no one wants to pay more than they have to. Here are a few tips to help you save on coverage for your home-based business.

• Bundle coverage. Some insurers offer discounts when you purchase more than one policy from the same company.
• Shop around. Rates vary between providers. Comparing quotes from multiple insurance companies may help you save.
• Create a risk management plan. Filing claims may result in a rate hike. Developing a strategy to manage your business's risks can help reduce the likelihood that you'll need to file a claim.
• Increase your deductible. Plans with higher deductibles generally have lower premiums. However, opting for a higher deductible increases the amount you have to pay out of pocket if you need to file a claim. When choosing your deductible, balance the benefit of upfront savings with the potential for increased out-of-pocket costs in the future.
• Select appropriate policy limits. It's important to have enough coverage to protect your finances if someone files a claim against you. However, having too much coverage can result in paying more than necessary. If you're unsure what policy limits to choose, ask your insurance company or agent for help.

The Bottom Line

The type and amount of insurance you need when working from home depends on your employment status and the type of work you do. Full-time employees may not need coverage beyond what their homeowners insurance provides, although it's a good idea to check with your employer and insurance company to be sure. However, people who are self-employed or operate small businesses out of their home may need additional insurance for adequate protection.