If you are going to run a home based business, you need extra insurance-that is, you’ll need insurance that most other people don’t need. It’s more than worth the premiums.

Running a home based business means you are self-employed and therefore you are totally responsible for your financial future. You enjoy all the freedom that comes with this, of course. You can travel on vacation whenever you want. You don’t have a commute except down the hallway from your bedroom to the den, or something like that. You set your own hours.

If you have a great week you can reward yourself by taking off on Friday-nobody can fire you for that! Your dress code is anything you want it to be. You can always be there for your family. You can eat whenever you want. And, hopefully, the greatest reward of all is you are making a substantial amount of money.

But the greater one’s freedom, the greater one’s responsibilities. Nobody can make the hard decisions for you: everything is up to you. If you make a bad guess, you pay the price and have no business pointing your finger; just as if you make a good call you reap all the rewards and get all the glory.

Thus, your home based business is your life’s blood. What would become of you and/or your family should something happen to you to make it so you can’t run your business for a while? What if you are involved in a serious car accident? What if you become extremely ill? What if a thief steals your computer and files one day when you’ve taken the family on vacation? What if there’s a fire that burns down your house and destroys your computer?

All of these tragic scenarios, while unlikely, are possibilities that must be considered.

You need to take a correct assessment of your business’ worth. In the case of a home based business, that probably won’t involve much in the way of equipment. You have a computer and a desk, perhaps a telephone for equipment. You likely don’t have any inventory (unless you’re running an eBay store), and even if you do it’s not going to be a huge amount.

So the business’ worth is going to almost entirely be how much money you make from it. If you’ve had your business for a few years you can look back and assess this. But if you’re starting out, you’ll have to take a guess based on what others running a similar business are making and on the stated income potential from the company (if you are an affiliate marketer).

So once you have that figure, you need to purchase disability insurance and home owner’s insurance in amounts that can cover you should you be out of commission for a while. You also need to have your own health insurance policy that you pay for (I recommend a high-deductible, lower-premium policy that includes a Medical Savings Account).

You should also have sufficient life insurance to replace your business income should you die an untimely death and if you have a family. Consult with a financial advisor to get these numbers right.

Your home based business is your business, your money, your staff of life. Insure it as you do all of your other valuables.

posted by Chris Simpson