THE REAL RISK
Sadly the above statement is a common misconception by most insured’s, or should I say uninsured’s, who have a business they operate out of their home. In today's economic climate, with massive layoffs and corporate downsizing, many individuals are turning to self-employment as a means to earn a living. This brings in new challenges for them, including insurance exposures.
Since each homeowners policy is unique, the following are general statements about the possible coverage problems faced by a business operating out of a home.
- The standard Homeowners policy provides, in general, NO LIABILITY coverage for any business activities
- The standard Homeowners policy provides very limited coverage, usually up to only $2,500 for business personal property while ON the premises. OFF premises exposures are even more limited
- If the business is operated out of another structure on the premises, the other structure is not covered on the standard Homeowners policy
- The definition of and "INSURED" in the standard Homeowners policy does not include corporations, non-resident “partners”, or employees thus there is no coverage.
- You may be able to add by endorsement certain “incidental business” activities to your policy. However, the coverage is very restrictive and usually limited to ON premises activities, virtually no OFF premises activities are covered.
- The standard Homeowners policy does not provide any coverage for professional liability. This is especially troubling as many in-home businesses are of a professional or service type nature providing consultation and/or professional advice to thier client. Therefore there is no coverage for these activities.
- There is no coverage for business income on the homeowners policy.
- Other coverages to be considered are potential Automobile Liability exposures if personal vehicles are used routinely in the course of the business operation and Workers Compensation if you have your own employees.
- Your Homeowners Insurance Carrier has a right to know what you are doing and you have a duty to keep them informed. Failure to disclose the business exposure could jeopardize the personal coverage as well.
The bottom line is there are large and ominous coverage gaps facing individuals operating ANY type of business out of their home. The business should be treated as any other regardless of where it is operated.
THE SOLID SOLUTION
Start with a detailed conversation with your independent insurance agent. Many coverage options are at your disposal and surprisingly affordable. Many insurance companies specialize in writing small packages which bundle together necessary general liability and property coverages to protect these In-Home operations.
As with anything communication is key. By lettting your agent know what your plans are ahead of time, you can avoid an expensive uninsured loss.