Posted on: 26 October 2021
In recent years, many Americans have opted to create a side gig to fulfill a dream or just to earn some extra income. Because side gigs are typically developed from kitchen tables or home offices, their owners often do not fully realize the potential liabilities they may face as a business owner. If you are currently operating a side gig or have one in the planning stages, the following information will help you understand why you need the shelter of insurance that is specifically designed for your type of small business venture.
Standard home insurance probably does not provide coverage
When side gigs are developed in the home, many homeowners and renters assume that their existing homeowners or renters insurance coverage will provide them with all the protection they need. They know that insurance is important but feel that a separate business insurance policy will only be necessary if, or when, the side gig becomes a full-fledged business with its own location, separate from their home.
Unfortunately, small business owners who operate their side gig activities from their home can face losses of inventory, product, equipment, or other assets of their business from theft, fire, water damage, or other disasters that will likely not be covered under a standard homeowners insurance policy. For example, if the home where the side gig activities are performed experiences a fire, the homeowners policy could exclude any of the assets or inventory related to the side gig when paying the remainder of the claim.
Many standard homeowners and renters insurance policies simply do not provide coverage for any type of for-profit activity on the premises. Without specific business insurance, both you and your investment in materials, equipment, and inventory can be at risk, should an accident or damage occur. Additionally, homeowners may also expose their private home and assets to liability should their side gig activities result in some type of accident or legal action.
Lawsuits are a real risk for any business owner
In general, anyone can be at risk of being sued, but those who provide any type of product or service for sale are especially at risk of being named in a lawsuit. No matter the size of their company, any business owner are at risk of being sued for many reasons, including:
- dissatisfaction of a client or customer
- errors or problems with products or services
- injuries incurred on the premises by workers, delivery people, customers, clients, or visitors
- data or security breaches that expose the personal or financial information of clients or customers
- negligence by staff or employees
Homeowners may even face legal actions from their HOA over their side gig activities performed in the home. Without the protection from liability offered by a business insurance coverage, your business, as well as your family's home and assets, could all be at risk.
An LLC cannot provide enough protection on its own
Some side gig owners choose to form a limited liability company (LLC) or structure believing that taking this action can help to shelter them from liability. While the formation of an LLC can be helpful, it cannot provide the robust level of protection your business may need as it grows. Instead, businesses such as side gigs operated from the home typically must consider adding specific home-based business insurance in the form of a rider attached to the existing homeowners policy or as a separate business owner's policy, which offers bundled coverage tailored to the needs of the type and size of the business it will cover.
A side gig capable of successful growth deserves to be protected. To learn more about business insurance and how it can be tailored to meet the needs of your growing side gig, contact a business insurance broker or agent in your area.Share