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Majority of in-home business owners may be at risk

This information was provided by the Independent Insurance Agents of America

ALEXANDRIA, Va.--While many entrepreneurs have enjoyed success building in-home businesses, most are currently vulnerable to major losses because they are not properly insured, according to new research released this week by the Independent Insurance Agents of America (IIAA). In fact, many do not even realize they don't have the necessary coverage to protect their business from theft, physical damage, and other expensive losses.

Study findings include:

  • At least 60% of in-home businesses are not properly insured. Among the most vulnerable: older in-home business owners. 68% of home-based entrepreneurs between ages 55 and 64 lack adequate business coverage to protect their firms--more than any other age group. Among the most protected: those who reside in the Northeast.
  • Those in the 55-64 age group who are insured are still less protected than any other age group. Older in-home business owners choose the less comprehensive and often inadequate "supplemental business riders" to their homeowners policies rather than comprehensive business insurance more often than any other age group.
  • Other in-home business owners at particularly high risk for devastating business losses include men (64% at risk), those with incomes between $15,000-$25,000 (77% at risk), and those who reside in the western United States (66% at risk).
  • Those in-home business owners at lowest risk include women (56% at risk), young entrepreneurs (18-34) (57% at risk) and seniors (65+) (52% at risk), middle income entrepreneurs making between $25,000-$40,000 (57% at risk), and those who reside in the northeast United States (49% at risk).
  • Although the study shows that they are slightly more "insurance savvy" than their male counterparts, women in-home business owners are still particularly vulnerable to financial risks caused by inadequate or non-existing insurance coverage because they make up a large and growing percentage of people working out of their homes as entrepreneurs. The Small Business Administration estimates that 300,000 women start in-home businesses each year.
  • Overall, the lower the income of an in-home business owner, the less likely he or she is to have business coverage. But even wealthier in-home business owners lack comprehensive insurance. An alarming 59% of home-based entrepreneurs making more than $50,000 don't have adequate business insurance.
  • Of the home-based businesses without proper coverage, 44% of their owners said they didn't buy business insurance because they mistakenly thought they were already covered under another type of policy. Overall, women (40% at risk) were slightly more informed than their male counterparts (47% at risk).
  • Very few in-home business owners indicated that money was a major factor in their decision to forego business insurance, indicating that the problem is more an issue of knowledge than cost. One exception: the category of in-home business owners at highest risk--those with incomes between $15,000-$25,000 (77%)--were more than twice as likely as any other category to list cost as a major factor in declining business insurance.
  • More than half (56%) of stay-at-home entrepreneurs who have already experienced losses in the past still lack the insurance they need to protect against future losses. Again, men (62% at risk) remain at higher risk than their female counterparts (45% at risk).
  • 68% of in-home business owners are married. 51% have children in the house. Over 80% are registered to vote.

The U.S. Bureau of Labor Statistics estimates that there are more than 18.3 million home-based businesses in the United States. And, there are as many as 43 million Americans running these entrepreneurial entities which range from business services to daycare to plumbing. With increasing independence due to technology and growing income and tax benefits, The Home-Based Business Report, estimates that three in 10 Americans will operate a home-based business by 2000.

IIAA recommends that home-based entrepreneurs seek information on protecting their business assets from an experienced, professional independent insurance agent who will help them protect against liability, loss of income, and property damage. While levels of coverage and premiums depend on the risk associated with a particular business, a comprehensive commercial policy can cost as little as $150 a year. Less comprehensive policies can cost even less.

Founded in 1896, IIAA is the nation's oldest and largest national association of independent insurance agents, representing a network of 280,000 agents and agency employees. Independent agents offer customers a choice of policies from a variety of insurance companies. Independent agents offer all lines of insurance--property, casualty, life and health.

EDITOR'S NOTE: IIAA is happy to provide more information about this new study and in-home business insurance. We can provide spokespeople and connect you with an in-home entrepreneur in your area. Please contact Amy Gergely, Consumer Communications Advocate, IIAA at 703-706-5407 or Sue Nester, Director, Broadcast Media, IIAA, at 703-706-5448.

This information reprinted with the permission of the Independent Insurance Agents of America. For more information about the organization, you can visit their web site.

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