Starting a home-based business in Colorado offers flexibility, but many entrepreneurs don’t realize that their homeowners insurance won’t cover business-related losses. If you sell products, provide services, or store business inventory at home, you may need additional insurance coverage to protect against liability claims, property damage, and cyber threats.

Does Homeowners Insurance Cover Home-Based Businesses?

In most cases, NO. Standard homeowners insurance excludes business-related risks, such as:

❌ Liability lawsuits if a client is injured at your home.
❌ Business equipment losses (computers, printers, inventory).
❌ Cyber liability if customer data is compromised.

Without proper coverage, business-related losses will NOT be reimbursed by homeowners insurance.

Types of Insurance for Home-Based Businesses

1️⃣ Home-Based Business Endorsement (For Small-Scale Businesses)

• Adds business coverage to an existing homeowners policy.
• Ideal for freelancers, consultants, and small e-commerce sellers.
  💡 Example: If a fire damages your home office equipment, this endorsement helps cover replacement costs.

2️⃣ Business Owners Policy (BOP) (For Growing Home-Based Businesses)

• Combines business liability, property coverage, and lost income protection.
• Recommended for businesses with significant inventory, clients visiting the home, or high revenue.
  💡 Example: A home bakery owner is sued after a customer claims their product caused an allergic reaction—a BOP covers the legal defense.

3️⃣ Cyber Liability Insurance (For Online Businesses & Remote Work)

• Protects against data breaches, hacking, and identity theft.
• Essential for businesses that store customer payment or personal information.
  💡 Example: A graphic designer working from home suffers a cyberattack—this policy covers recovery costs and legal fees.

4️⃣ Commercial Auto Insurance (For Business Use of Vehicles)

• Required if you use a personal vehicle for deliveries, meetings, or client visits.
  💡 Example: A home-based florist delivering wedding arrangements gets into an accident—commercial auto insurance covers vehicle damage and liability.

How to Lower Home-Based Business Insurance Costs

🔹 Bundle Business & Home Insurance – Many providers offer discounts for bundling policies.
🔹 Install Cybersecurity Protections – Firewalls and encryption reduce cyber insurance premiums.
🔹 Limit Client Visits at Home – Fewer visitors lowers liability risks.

Final Thoughts

If you operate a business from home, don’t assume homeowners insurance will cover it. Adding business-specific coverage protects you from lawsuits, property damage, and financial losses. Review your business risks and ensure you’re properly covered before it’s too late.