According to the United States Chamber of Commerce, there are approximately 19 million home-based businesses in the United States. Whether you are running a solo business from your desk at home or have a whole setup where you see customers or clients, running a business from home can be incredibly convenient, not to mention cost-effective.
Unfortunately, as convenient as operating a business out of your home can be, it opens up a can of worms regarding liability. While an entrepreneur whose home business is only them and their laptop, such as an insurance agent who works from home, might not have much to worry about, it becomes much more complicated when you’re running a business that involves bringing other employees or customers into your home. If a third party gets injured on your property while doing business with you, liability becomes complicated.
While some entrepreneurs might think their homeowners’ insurance is enough to protect them, this is rarely true. Most homeowners’ insurance policies exclude business activities that happen in the home. For example, if a therapist has a home office where they see patients and a patient is injured during an appointment, that incident likely will not be covered by the therapist’s homeowners’ insurance. If they do not have additional business liability insurance, they may be on the hook for any damages caused by their negligence.
However, just as businesses working out of a dedicated office or storefront can protect themselves from liability, so can home entrepreneurs. Since their workplace is also their residence, home entrepreneurs might have to take extra precautions to ensure that neither their business nor their home is at legal risk. C. James Williams III, Principal at Burnett & Williams, explains some steps businesses can take to protect themselves from liability.
How Home Business Entrepreneurs can Protect Themselves From Liability
One of the best things a home entrepreneur can do to protect themselves from liability is to be proactive and establish a safety culture. “Although you are doing business in your home, it is also important to note that this also makes your home a place of business,” says Williams. Because of this, you are expected to keep your home safe for customers. If you neglect repairs or if your furniture is precariously arranged and a customer is injured as a result, you could be in serious trouble.
“The best way to prevent a personal injury lawsuit is to prevent accidents from occurring in the first place,” asserts Williams. “If you have any potential fall hazards, label them with ‘watch your step’ signs and verbally alert customers to watch their step. If any spills or leaks could cause a slip and fall, clean them up immediately. Repair any broken furniture or fixtures as soon as possible so they do not pose a hazard. Although it’s impossible to prepare for every possible accident, these steps are a great place to start.”
Beyond these physical steps, home entrepreneurs should also prepare by purchasing business liability insurance with medical payments benefits. If you have this type of insurance, the claims adjuster does all the work for you — investigating the loss, paying the claim if appropriate, and hiring a lawyer to defend you. “The medical payments benefit can pay regardless of the property owner’s fault, and helps the owner by potentially preventing the injured from filing a lawsuit if their out-of-pocket medical bills have been reimbursed,” Williams explains.
Additionally, home entrepreneurs should absolutely incorporate their business, according to Williams. When a company is incorporated, its owner’s personal assets are shielded from any claims. “Since you are doing business out of your home, it is imperative that your business is incorporated, as a lawsuit could otherwise potentially put your home at risk,” says Williams. “If you choose not to purchase business liability insurance, incorporation is an even more crucial step to take.”
Finally, if you are a home entrepreneur, you may be able to avoid a serious lawsuit by communicating with the injured. “Home entrepreneurs often have greater intimacy with their customers than typical business owners,” Williams adds. “After all, they are inviting a customer into their home. If you make it clear that you genuinely care about them and their recovery after an injury, they may be less likely to pursue a large lawsuit and agree to simply having their medical costs reimbursed.”
Don’t let fears of liability stop you from taking advantage of the benefits of running a home business. “By taking steps to protect yourself, your business, and your residence, you can operate your business from the comfort of your own home without having to worry about the consequences of a potential lawsuit,” Williams concludes.
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