By: Joel McKinnon
We have all been there, our friend call us and they have this AMAZING opportunity that we just HAVE to hear about. So being the nice friend that we are , we sit down and listen. As we sit there, we quickly realize our friend has engaged in a MLM (Multi Level Marketing ie. Home Based Business) opportunity. We continue to listen, and at some point, we decide this (running a home based business) may be a great opportunity for us to earn a little extra cash on the side. Most of us are aware of the bigger MLM companies such as AmWay, Mary Kay, Avon, Pampered Chef, Zija, StellaDot, 31 gifts, Premier Jewelry, Silpada Jewelry etc. Regardless of the company, their size or type of MLM company you work with, you should be properly insured. You need to protect your assets and understand what your risks are. Will your homeowners policy cover you? Do you need a business owners policy? What is your risk, and do you have coverage? 
Many times, our clients think that there is automatic coverage from their homeowner’s policy for their small home based business / consulting business, however most policies actually exclude any business pursuits out of the home. However, some companies do offer an additional endorsement that can be added to the policy to cover your home based business personal property such as furnishings, supplies and equipment that are used for the business. What about liability claims? Under a typical homeowner’s policy, a claim resulting from any of these common scenarios could easily be denied. Keep in mind, most homeowners and renters policies do not cover liability or damage to property from business activities.
- A business client is injured slipping on your front porch
- Your computer is destroyed by a power surge during a lightning storm
- Customers’ checks are stolen from your home
- A customer breaks inventory or is injured while you’re exhibiting at a small trade show
From my experience, most MLM companies, distributors etc will sell you on the opportunity, but never really give you any guidance on the business operation side of things. From accounting, to insurance and so on, understanding your options and how to properly run a business could be the difference between making money and losing money. It could be the difference between having insurance and being hung out to dry if you are sued. Often, home-based businesses are underinsured – a fact their owners discover after an incident occurs when they realize the insurance they have is inadequate to address the magnitude of the problem.
If you have a home-based business or are thinking about starting one, it’s a good idea to learn about the range of insurance products available. While your specific business may not require all types of insurance, it’s important to understand your potential risks and your insurance options.
In closing I would like to share a link with you – this is a link to fellow Farmers Insurance agent Keith Wainauski’s blog site. Keith has been an agent with Farmers for over 10 years, and recently he had the opportunity to interview Scoot Kimbro of Kimbro Coco a Xocai Health Chocolate distributor. In this video, you will get a chance to hear from Scott on why he chose to insure his home based business with a separate commercial policy instead of just relying on his homeowners insurance policy. Check out the video by clicking HERE.