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Insurance for home-based entrepreneurs: What does De Anna Post need?

So, if you were De Anna Post - would you spend your money on expanding your business or on protecting what you already have?

The truth is that most in-home business entrepreneurs seem more interested in growing than protecting their existing assets. Post has a lot of company when it comes to her decision to go without additional insurance to cover her business.

But, if she did decide to get coverage, what would it cost? We asked an expert from Independent Insurance Agents of America. The answer is that it isn't cheap.

Post's business, Post Media Services in Triangle, Va., specializes in media services including media and video productions to help promote businesses. One of her clients, for example, has a children's exercise company. Post is producing a thirty-minute exercise video, doing a press release and getting her booked in different children's stores.

She's been in business for about eight years, with an office in the basement of her house. She has computers, scanners and other equipment. She figures she has about $10,000 worth of equipment. She doesn't usually have customers to her house, she prefers to meet them outside the house.

"When you're shooting a video, it can sometimes be hard to determine who to contact," she said. "If you do it wrong or something goes wrong, I wonder if you can get sued. That's a concern."

She knows her homeowners insurance won't cover her for business-related losses, but she's reluctant to deal with the cost and time expenditure required to get more comprehensive insurance.

"Actually, it just seems like an added expense. We just recently moved to a new area and establishing my business was more important to me," she says. "Also, I've been thinking about buying new equipment. That could cost up to $100,000."

Besides cost, the thought of getting all the information organized and going to an agent is a daunting prospect.

"It's confusing. I'm not sure what's needed, for what purpose and when you would need it. Things like that," she said. "When you call an agent, sometimes I'm not sure what is really needed versus what they are trying to sell you."

Madelyn Flannagan, the consumer affairs advocate for the Independent Insurance Agents of America, says there are several coverage options for Post.

"The first thing she should look into is the professional liability aspect. With the type of work she's doing, she puts out printed products that other people are using. There is professional liability exposure. That would cover her in case there is a misprint that caused a lawsuit," Flannagan said.

Professional liability insurance is expensive. It can cost between $5,000 and $7,000 annually.

Flannagan said Post also should consider general liability policy that would cover her in case someone making a delivery on her behalf caused an injury or damage. That could cost between $550 and $1,000.

Coverage for her computer and other equipment, if purchased on a separate policy, could run as high as $1,500 annually if she does buy all that expensive electronic equipment for $100,000. That would also include electronic data loss. If she has a laptop that she takes off-premises, she should make sure her policy covers that.

Since Post lives in Virginia, she does not need workers compensation insurance for herself. She would only need it if she had three or more employees. If she was interested in the coverage, however, she does have the option of buying it at a cost of 45 cents per hundred of dollars of payroll. She is limited to a maximum of $56,300 in coverage, which would cost no more than $300.

Workers comp would cover her for any injury on the job to herself. It would cover both medical costs and income loss.

"Actually, workers comp can be a pretty good deal, so it can be worth looking into even if you're not required to have it," said Flannagan.

If Post uses the family car for business purposes, she should make sure she is covered for accidents that occur while she is "on the job." She could consider moving the car insurance over to the company, which would cost her about 25 percent more. That would provide her with coverage if someone working for her ever drives the car.

Another option for Post would be a comprehensive business policy, said Flannagan. The price might be somewhat lower than the separate policies and insurance to cover loss of income in case of a business interruption would be included.

If she does go ahead and buy the new equipment, she should definitely get insurance for that, Flannagan said. And if she chooses a high deductible, of $500 or more, she could reduce the cost.

In terms of any liability incurred by not securing proper permissions for video shoots, the general liability policy would cover that. Flannagan said the inability to secure the proper permissions could, for example, result in a video being unusable. "General liability would address that loss," she said.

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