Usually when you think of homeowners insurance natural disaster comes to mind. To the home business operator, a good homeowner’s policy could mean protection from an unnecessary law suit. Here’s a guide to what homeowner’s insurance covers and how it applies to you small business.

What’s covered by a typical homeowner’s policy?

A better question would be, “what isn’t covered by a homeowner’s policy?” It’s best at this point to break it up into two main areas. The first area includes damage to your home, the second covers liability for property or personal damage to others while inside your home.

If you’re running a business from your home with customers in and out, a homeowner’s policy that covers liability is essential. A trip over a rug could cost you your business. It’s all too common for home business operators to look past the fact that their home is no different than an office building. If anything gets damaged, people or property, the owner is liable. This includes occurrences that may be well out of your hands, like an angry pet or a falling tree.

The half of a homeowner’s policy that most people are familiar with is also great for piece of mind. Tornados, lightning even earthquakes and flooding are defiantly worth protecting against. And if you have customers that smoke, protection against fire isn’t bad either.

What doesn’t a typical homeowner’s policy cover?

Most policies are similar when it comes to wear and tear. A home business with a lot of foot traffic might wear a groove into your carpet, but your insurance company isn’t going to fix it. Also if you neglected to maintain your roof for the last 20 years then all of a sudden it caves in, odds are very good that it won’t be covered.

Also, most policies don’t cover earthquake, flood or locust damage. Make sure you are aware of what type of damage your home may be susceptible to and contact your agent about special additions to your existing coverage. Check your elevation before taking out flood coverage. I once met a homeowner that lived on a hill and still purchased flood damage coverage. It’s good to be safe, but don’t go overboard. If you live 1000 miles from the coast, hurricane coverage isn’t really necessary.

What if I’m just renting?

If you’re not a homeowner and you’re running your business out of an apartment or rental house, you are still liable for damage to any clients or customers that set foot in your place of business. Don’t assume that the building owner’s policy is going to cover damage to a client or customer if you’re running a business. Also if your neighbor sets fire to their place while you’re away and all your belongings burn up, the building owner’s policy will not cover your nice new sofa. It also won’t cover the cost of staying in a hotel until you find a new place to live.

The good news is that renter’s policies are usually much less expensive than homeowner’s policies. Talk with your agent. You could save yourself a bundle.