If people pay you for a side business, you probably need at least some business insurance, usually sooner than you’d guess. A homeowners or renters policy is written for your household, and it typically limits or excludes business property and liability for business activities, so a client who trips on your porch steps on the way to a fitting, or a candle you sold that scorches a buyer’s mantel, may not be covered by the policy you already have. The usual first policy is general liability if you make or sell things or meet people in person, or professional liability if you sell advice, design, code or other skilled work, each subject to its own terms. And the moment that usually forces the question is a piece of paper: a client contract, a venue agreement or a market vendor application that asks for a certificate of insurance.
It applies to any business type you can start a quote with, run on nights and weekends: freelance design and bookkeeping, tutoring, dog walking and pet sitting, baking and catering, photography, handyman work, crafts sold at markets and online.
Key takeaways
- Homeowners and renters policies typically limit or exclude business property and business liability, so a side business can be uninsured even when the house is fully insured.
- Your employer’s insurance typically covers only the work you do for your employer.
- The SBA notes that a homeowners rider can cover a small amount of business equipment and some liability, which may be enough for a very small, low-risk side business.
- A client contract, venue or market agreement that requires a certificate of insurance is usually the clearest sign it’s time to buy.
- Using your personal car for deliveries or client visits can raise a separate question with your auto insurer, and commercial auto is a different product from business insurance.
What your home policy probably won’t do
A home policy is built for a household: your belongings, your house and your personal liability for everyday accidents. Business is a different animal, and most home policies handle it in one of two ways. They may cap business property at a low amount, so a $4,000 sewing machine or a closet full of inventory may be covered for only a fraction of its value, and they may exclude liability that arises from business pursuits, which can take in the client who visits for a fitting, the student who comes for a lesson and the product you sold.
There’s a middle option, and the Small Business Administration points to it: a rider on your homeowners policy can cover a small amount of business equipment and some liability for injuries to other people. For a tutor who sees two students a week or a writer whose only business property is a laptop, a rider may be enough, so call your home insurer and tell them about the business in writing, because a business you never mentioned can complicate even an ordinary home claim. For anything bigger, such as inventory, client visits, products sold to the public or work that clients rely on, a business policy is usually the cleaner answer. The details of what to check in your home policy are in does homeowners insurance cover a home business?.
The contract that asks for a certificate
Say a freelance designer with a full-time job lands a project with a regional hospital system, and the master services agreement includes an insurance exhibit asking for professional liability at a stated limit, general liability and a certificate of insurance before work starts. The designer has none of it, and the start date is in nine days.
It’s a common way to meet insurance. Bigger clients often put coverage in their vendor contracts as standard, but the requirement doesn’t shrink because you’re part-time. Farmers markets, craft fairs and pop-up venues often do the same in their vendor terms, and if you sell or book through a marketplace or app, read its seller or provider terms for any insurance requirement.
Is it a hobby or a business?
Does a few hundred dollars from a weekend craft table even count as a business? The IRS has its own way of deciding that for tax purposes, weighing things like whether you run the activity like a business, whether you expect to make a profit and whether it has elements of personal pleasure or recreation.
The insurance question is simpler, though, and it doesn’t depend on the tax answer at all. If someone pays you, relies on your work, eats or uses what you made, or comes to your home because of the business, there’s a business risk, and it’s that risk a home policy may leave out, whatever you call the activity. A hobby that never takes money, never takes clients and never sells to the public is a different matter.
Your day job’s insurance stays at your day job
A lot of side businesses are the same work people do all week, just for their own clients, and that’s where an expensive misunderstanding lives. Your employer’s professional liability typically covers the work you do as its employee, but when you do the same kind of work on the side, for clients who pay you directly, your employer’s policy typically has nothing to do with it, and the employer may not want to hear about it either. The bookkeeper who keeps three clients on the side, the nurse who tutors for nursing exams, the IT technician who fixes small office networks on Saturdays: each is running a separate, uninsured business until they buy a policy of their own.
Signs your side business has outgrown “no insurance”
Here’s a practical checklist. Any one of these is a reason to look at business coverage:
- A client, venue, landlord or marketplace asks for proof of insurance.
- Clients or customers come to your home for the business.
- Your business equipment or inventory is worth more than your home policy’s business property limit, or more than you’d want to replace yourself.
- You hire anyone, even part-time, which brings your state’s workers’ comp rules into play; find your state’s agency on the Department of Labor’s list.
- Your side income is starting to matter to your household budget, so a lawsuit or a stolen camera bag would actually hurt.
None of these needs a big business to happen. Number one usually comes first.
What most side businesses should start with
Our view: match the first policy to what could go wrong, and keep it small. Few side businesses need everything on day one. If you sell things or meet people in person, start with general liability, which typically covers injuries and damage to other people’s property and, for many policies, products you sell. If you make candles, cosmetics, food or toys, check that the policy includes products-completed operations and list every product on the application, including anything you buy in and sell under your own label, since product claims can arrive long after the sale. If clients pay for your judgment or skill, start with professional liability, which typically covers claims that a mistake in your work cost them money. If your gear leaves the house, such as cameras, tools or grooming kits, add tools and equipment coverage, and if inventory or equipment sits at home in amounts your home policy won’t cover, ask about commercial property.
An LLC won’t save you here, since the business’s own money and assets are still exposed to a claim; see does an LLC need business insurance?, or, if you’ve never formed anything at all, business insurance for sole proprietors, which explains what that means for your personal assets. And if you’re not sure whether anything is legally required, start with is business insurance required by law?, because for most side businesses the answer comes from contracts, not statutes.
See what general liability costs for your business
About five minutes, all online. Your certificate is ready the day you buy.
Frequently asked questions
Does homeowners insurance cover a side business?
Usually only in a limited way, if at all. Homeowners and renters policies typically cap business property and may exclude liability from business activities, though some insurers offer a rider for a small amount of business equipment and liability, which may suit a very small business. Ask your home insurer what yours covers.
Do I need insurance for a small side hustle?
If clients pay you, rely on your work, visit your home or buy products from you, there’s a business risk that a home policy may not cover. Many small side businesses start with general or professional liability, especially once a client or venue asks for proof of insurance.
Does my employer’s insurance cover freelance work I do on the side?
Usually not. An employer’s policies typically cover the work you do for that employer, while work you do for your own clients is generally a separate business that needs its own coverage.
When should a side business get insurance?
Usually when a contract, venue or marketplace requires it, when clients come to your home, when you sell products to the public, or when clients rely on your professional work. Buying before the first contract is simpler than buying the week it’s due.
