According to the latest research by the Insurance Information Institute, most small businesses, and especially the home office entrepreneur, are either woefully under covered for risk, or they have no insurance coverage in place at all.

Understanding risk, and putting in place a viable risk management plan, is something that tends to get neglected by entrepreneurs and small businesses owners. Even those who have been diligent with regard to their risk, tend to not understand risk transfer thoroughly enough. Because of this, most tend to not have enough insurance coverage or they end up with coverage that will not be helpful to them should one of their risks materialize.

Many small business owners and entrepreneurs tend to think that insurance coverage is pretty much the same. This is not so. Coverage is dependent upon the type of risk involved as well risk pooling and premium negotiation. The challenge is that entrepreneurs tend to get that glazed over look in their eyes when the subject of risk management and insurance comes up.

What they need to do is understand that there are four basic types of insurance they might want to take on to help mitigate their risks. These are business, liability, property and worker’s compensation. These all need to be examined with your risk management advisor and the proper coverage for your particular situation adopted. In addition, most small business owners tend to ignore their particular industries and the inherent risks that are peculiar to that industry.

There is no such thing as blanket coverage for your risk. For example, many home based entrepreneurs falsely believe that their simple homeowner’s policy protects them as a business and eliminates the home based business risks. Many think that they are protected by their client’s particular policies. Many have discovered to their shock that they are, sometimes years later, involved in litigation and liability issues.

Other risks not covered by your homeowner’s policy include such things as an accident happening to a client who comes to your home office. If they are injured, your basic homeowner’s policy will not cover it. What happens if your printer breaks down? Are you covered? No. What if you get sick or injured and cannot work? What if a natural disaster puts an immediate halt to your cash flow? These are the types of risk that the home based business needs to insure against.

As a home based entrepreneur you need to get serious about your business. You are not simply mom or dad staying home in your pajamas free of the 9-5 cubicle world grind. You are a professional. You are running a small business enterprise. Is it time you started to recognize your peculiar type risk and to develop an effective risk management strategy to protect yourself for the long run.