If You Ever Work From Home, How Protected Are You If A Disaster Strikes?

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Millions of Americans work from home, either all of the time or on occasion. But, if a fire, flood, or natural disaster were to hit your home, would your insurance cover the lost business revenues, office equipment, or property belonging to your company?

The first thing you should do is prepare for the worst now. Do not wait until it is too late. See if you have the coverage you need, what exclusions apply, and whether there is anything you might need to do to ensure that you will have the maximum level of protection should the worst occur.

1. Check your property insurance. A homeowner's insurance policy or renter's insurance policy may or may not cover business related personal property, like the laptop your office issued you, or the printer you use exclusively for your home based business. Read your policy carefully, talk to your insurance agent (but beware of attempts to “upsell” you), and, if in doubt, ask a lawyer to interpret your policy for you. You may also want to consider interruption insurance, which will cover you financially if the insurable event puts you temporarily out of business.

2. Make an inventory now of all property, and delineate between personal and business property. Be as specific as is practical, including manufacturers, model names/numbers, serial numbers, dates of purchase, and approximate prices. If possible, take photographs of the items and any receipts, and store the images and inventory lists on the Internet in the cloud to prevent the same disaster that destroys your home office from destroying your documentation.

3. Be redundant. Protect paper documents in water-tight and/or fire-resistant containers, but also make digital backups that you store in the cloud. Remember, in some instances you could become liable for the loss or destruction of such documents, so having digital backups stored in the cloud will help to mitigate or prevent any liability. Things to consider storing in this fashion include wills, deeds, trust documents, tax returns, customer lists, personnel files, financial records, contracts, or any other documents upon which your home-based business (or you) may rely for any transaction or need in the future.

4. Recover quickly

Recovering after a disaster can often be the hardest thing to do, both financially and emotionally. But, when your business has been conducted from your home, your very livelihood rests on getting back on your feet as quickly as possible. Contact your customers and let them know what has happened, make arrangements to carry on their work for them, and stay in touch. Most customers will understand the circumstances and work with you, and those who do not were probably not customers you would have wanted to deal with anyway. If you are under any contractual obligations, be sure that any arrangements you enter into with your customers are made in writing and agreed to by both parties, preferably with a signature attached if possible. If you have a direct employer, ask for their assistance in your recovery efforts and see if any of their insurance will cover any of the business related property that may have been lost of damaged. Contact your own insurance company as soon as possible to make arrangements for inspection of the damage to your home.

In some instances, when your own insurance does not cover your losses, you may be able to get assistance from the Small Business Administration (SBA) in the form of a low-interest disaster loan. You might also qualify for Disaster Unemployment Assistance (DUA) through your state's unemployment office if your loss is as the result of a nationally declared disaster. Also, check with your accountant and the IRS to see if you can take a tax deduction for the loss or damage you suffered in the disaster. There may also be voluntary associations in your area who can provide assistance with food, clothing, shelter, and other necessities.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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