Our country has a strong history of entrepreneurs.
We’ve all heard stories about people who started a business in their garage - then expand to an office or building - and then become a multi-million-dollar company franchised across the country. These stories are exciting, but they are the exception. Most home-based businesses stay just that; home-based. Working from your home is convenient for the owner. They can work when they want, and overhead is lower since they don’t have to buy or rent office space. They already own or rent their home, and they are paying for utilities anyway. It’s a win-win, right? Well…MAYBE!
Whether it is a multi-level marketing company like Pampered Chef or Mary Kay, in-home day care, a photographer, an artist or crafter that sells their work; your homeowner’s insurance may not provide coverage for your business. Homeowner’s policies typically limit or exclude coverage for business ventures. It is estimated that about half of home-based businesses don’t have enough or any coverage.
First: Consider the investment in the business.
Equipment and inventory, etc. are considered business personal property. The standard home insurance policy has a $2,500 coverage limit for business personal property. Therefore, if you lose the equipment or inventory during an incident at your home, you may not have enough coverage to replace your business property. Customer’s property in your care that is lost or damaged is also not covered
Second: If a loss to your home requires that you relocate…what about your business?
Would relocating cause a loss of income? Your income is not protected by your homeowner’s policy.
Third: Arguably, the most important…consider your liability exposure.
If you are operating a home-based business, your homeowner’s policy could exclude coverage if the claim arises from your business operations. For example…a delivery person is dropping off a box of inventory, and he slips on your ice-covered porch. He sues for his injuries since you didn’t have your porch scooped & the ice cleared. Your homeowner’s insurance may not cover his injuries because he was there delivering for the business.
Whether you’re renting a house as an Airbnb, altering/mending clothing for customers, or baking cookies, if you earn money from activities completed at your home, then you need to verify that you have coverage. Chances are, if you started your own business, then you are doing something you are passionate about. You may not consider it a “job”. However, if you earn money doing it, your insurance company considers it a business. In addition, if you work for someone else, but are working from your home, then your homeowner insurance may not provide the coverage you “think” you have.
The old adage about begging for forgiveness rather than asking permission, doesn’t work when you’re dealing with legal ramifications. You cannot protect yourself from every scenario, but you can at least cover your bases.
Forget the old adage! Don’t be blind-sided! Ask the questions - know where you stand - be prepared!
Give us a call to discuss your home-based business to see if coverage can be added to your homeowner’s policy or if a business policy is needed.
- Kathy, Kristen, Allisa, Sara Jo, and Ashli - Bruning Insurance Agency -