Freelance Insurance 101: Business Property Insurance

This post was written by Hyke. Hyke is an all-in-one business administration platform for the top freelancers. From LLC formation to taxes, Hyke takes away all the pain with paperwork and helps you stay safe, compliant and save on taxes.

When you work as an employee, you don’t often have to think about covering your own health, liability, or property insurance. That’s because your employer takes care of those needs. For people who prefer working for themselves, however, the responsibility of getting all of the insurance they need falls on their shoulders.

Are you a self-employed freelancer? Then you must purchase insurance to protect yourself, and you will likely need more types of coverage than an average employee would. Hey, it’s just part of the cost of being your own boss—and we think it’s worth it!

What are the types of insurance that you’ll need to have in place when you’re a freelancer? Here’s the breakdown:

1. Health insurance
2. Business property insurance
3. Liability Insurance
4. Car Insurance

Why do you need these insurance policies, and how much will they cost you? Keep reading, as we’ll break it all down for you. This week, we’re covering business property insurance. Stay tuned each week to become an expert on all things freelance insurance!

Business Property Insurance

Property insurance helps compensate for loss of your business assets, such as computers, office furniture, equipment, and supplies. So, for example, if your outside office or home office were burglarized or destroyed by fire, and all of your equipment was lost as a result, your property insurance will pay you a sum of money that can help you recover.

What determines the cost of business property insurance?

There are three main factors that will help determine how much you’ll need to pay to get the business property insurance that will give you the most peace of mind:

• Policy limits – Every policy will have a maximum limit on how much you’ll be paid, regardless of how great a loss is. The greater the policy limit, the more expensive the policy will be. You can choose your limits to craft a policy that’s affordable, but covers losses you wouldn’t be able to swing alone.
• Value of coverage – Property insurance can pay you the cost of replacing the property you lost, or it can pay you the actual present cash value of that property.

While a replacement cost policy will replace your property at current prices, regardless of what you paid for it in the past, an actual cash value policy will pay only what your property was worth when it was lost or destroyed, so if an item has depreciated, you might obtain way less than what you’d need to replace it. For this reason, we recommend a replacement cost policy. It is, however, the more expensive of the two, so if you need to save money you can go with a more affordable cash value policy instead.

• Scope of coverage – Business property insurance comes in one of two forms. Named peril is also referred to as basic form, and this type of policy will cover you only for the types of harm listed in your policy. For example, the cheapest type of named peril policy covers only losses that are caused by lightning, fire, windstorm, explosion, hail, smoke, aircraft, riot, vehicles, vandalism, sprinkler leaks, sinkholes, and volcanoes. Contrast that with all risk, or special form policies, which will cover you for anything, except for certain perils that are specifically excluded, such as earthquakes. All risk will cost somewhat more than named peril policies. However, depending on the risks associated with your location, it may be the better option for you.

  Can you deduct this insurance as an expense? Yes!

When you file your taxes, don’t forget that the cost of business property insurance is a fully deductible business expense. Score!

Insurance You’ll Need If You Work at Home

When your home doubles as your place of business, the right insurance is crucial for peace of mind in all parts of your day.

You can get insurance for your home-based business property in a few different ways:

• Homeowners policies – You might be surprised to find out that your homeowners insurance (or renters insurance) provides you with a limited amount of protection for business property. This is usually no more than $2,500 for property damaged or lost in your home, and $250-500 for when it occurs away from home. If you have very little business property, this might be just enough coverage for you. So definitely check with your homeowners insurance to see what they’ll help you cover.
• Homeowners insurance endorsements – Did you know that you can double the amount of business property covered by your homeowners policy by purchasing an endorsement? Here’s an example: you could increase coverage from just $2,500 to a nice $5,000 for around $25-50 annually. Sweet, right? But keep in mind that these endorsements are usually available only for businesses that generate $5,000 or less in annual income. Also, if business-related visitors occasionally come to your home, you can obtain a “rider” (or add-on) to your homeowners policy, which will cover your liability if someone got hurt while there. The cost is modest, usually around $50 per year.
• In-home policies – The insurance industry has created a special policy for individuals who work at home. In-home business policies insure business property at a single location for up to $10,000. How much does this cost? Usually only around $200 annually. But, for an additional premium, the policy can include liability coverage that ranges from $300,000 to a $1,000,000. You can even find options that will protect against lost valuable papers, records, accounts receivable, off-site business property, and equipment. Keep in mind that liability premium costs are based on how much coverage you buy, so it can be tailored to your budget and the needs of your business.
• BOP policies – BOP stands for business owner’s policy. A BOP is for those who don’t run their businesses from home, but it can also be appropriate for larger home-based businesses. These policies combine both property and liability insurance in a single policy—convenient! While BOPs are pricier than in-home poli
  cies, they provide the most comprehensive coverage that’s available for small businesses, so this is the way to go when you want it all.
• Business property policies – As the name implies, you can find policies that only cover your business property. This is a good idea if you have extremely valuable business equipment, like expensive technology.

Insurance You’ll Need If You Rent an Office

If you rent an office, the first step is always to read through your lease very carefully to see if you’re required to have insurance.

Many commercial landlords require that their tenants have insurance to cover damage that the tenant does to the premises. The insurance should also cover injuries suffered by visitors or clients. Your landlord might even require that you submit proof of insurance, such as a photocopy of the first page of your policy, before you can start using their office.

Your lease might also specify how much insurance you must have in place in order to rent the space you need. In this scenario, you may find that your best option is a BOP policy that provides both property and liability coverage.

What happens if your lease doesn’t say anything about property insurance? Well, you might want to obtain it anyway. Remember, an owner’s property insurance policy usually doesn’t cover the tenant’s property, so you need to take the extra step to protect yourself.

If you have any questions about which coverages would be best suited for your business, Bunker’s insurance agents are always available to chat! Give us a call at 877-968-9108, email us at hello@buildbunker.com, or head to www.buildbunker.com to live chat and shop policies, with online quotes in under 5 minutes.

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