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Home Business Insurance Tips

Home Business Basics

Homeowner (HO) policies aren’t meant to insure businesses that are run out of a home. Premiums paid for homeowners coverage are for handling losses related to the ownership and use of a residence and related structures. Therefore, no liability coverage is available for business activities such as customers who slip and fall on your premises, damage to business property (owned or in your control), injury caused by things you make (products liability), or damage due to services that you promote or provide. It is also unlikely that an insurer would provide a legal defense against business related claims.

Generally, a HO policy does not provide workers compensation coverage for any employee. Medical expense and liability coverage may be available for workers who are ineligible for workers compensation, such as maids, butlers, or nannies, but such coverage only applies if an injury occurs while performing residential tasks.

Example: You send your nanny to deliver copies of your business proposal and, on the way to the client, she is seriously injured in a fall. Your policy won’t provide any medical expense coverage for your nanny because she was performing a business-related chore.

There is no coverage for detached garages, barns, or similar structures on your residence premises if they are used in whole or part for business.

Example: You store $3,000 worth of equipment and supplies that you use in your job in your garage and the garage burns down. The fire loss to the garage becomes ineligible because of its partial business use.

A basic HO policy may protect certain property. However, the coverage may be limited to as little as a few hundred dollars. Items qualifying for limited coverage include business personal property kept in or around your home, business personal property kept at a location other than in or around your home or landlord's furnishings. One way to improve your coverage is to add policy options that do the following:

  • increase the coverage limits for business personal property
  • cover garages and other buildings that are rented to others
  • protect electronic business equipment which is usually used in a vehicle while such equipment is located outside of a vehicle
  • provide theft coverage for landlord's property
  • acquire limited business personal property and liability coverage for an in-home daycare
  • cover a condo unit owners' liability for damage caused by renters
  • provide premises liability coverage (i.e. a customer slips and falls)

Please see the other parts in this series that discuss specific business situations.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Home Businesses (Offices) – Part 1

A variety of businesses are routinely operated in homes. This article discusses aspects of particular operations. Refer to part one for background information on coverage basics as well as our other parts discussing different businesses.

Sales Office

Usually a HO policy does not offer much protection for business property. In fact, available coverage may be up to only $2,500 for personal property used for business and kept on the residence premises. Further, no coverage applies to business property such as inventory, product samples, or items being held for delivery. Finally, even optional coverage excludes property related to a business conducted on the premises. For example, you are a cosmetic sales rep who also holds make-up parties in your home. For customer convenience, you keep an inventory of cosmetics at home. The HO policy will not cover this property.

If you are a sales person operating out of your home and have limited inventory, some companies will cover you with a Businessowners policy (BOP). A BOP provides broad coverages for buildings, personal property, loss of business income and extra expense incurred to remain in business (after a fire or other covered cause of loss), premises liability and medical payments. If you have more than $1,000 of goods off premises in transit, you will need to add additional coverage. Goods stored at other locations must be added to the policy.

If you cannot qualify for a BOP and a home business endorsement or separate policy fails to meet your need, your agent will probably have to build a special commercial package policy to handle your business. Commercial lines agents have both the expertise to design the appropriate coverage and access to the markets that offer policies for your sales business.

See Part 2 of this article.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Home Businesses (Offices) – Part 2

In part one of this article, we discussed what coverage issues must be considered when running a sales office out of a home. Besides the protection previously mentioned, you will need workers compensation coverage for any employees, even part timers, and, if you deliver anything or if your vehicle is larger than a car, van or small pickup, you may need commercial automobile insurance. Another reason for buying a commercial auto policy is if any auto is corporately owned.

Professional Offices

Regarding doctors, attorneys, architects or similar occupations, whether your home office is your only office or simply a satellite office, you will need to work with an insurance agent who is familiar with the coverages that are appropriate for professionals.

BOPs are suitable for most professional offices and can cover buildings, personal property, loss of business income, extra expenses incurred to operate the business (after a fire or other covered cause of loss), premises liability and medical payments.

Consult with your agent or your professional association(s) for professional liability and errors and omissions coverage.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Home Businesses (Landlords)

A variety of businesses are routinely operated in homes. This article discusses aspects of particular operations. Refer to Home Businesses - Basics for background information on coverage as well as our other articles discussing different in-home businesses.

Landlord

The homeowners policy is designed to cover landlord-occupied residential buildings, landlord-owned personal property, and loss of rents (after a fire or other covered cause of loss), premises liability and medical payments. Note that the maximum occupancy that may be covered under a HO policy is a four-family dwelling. A dwelling policy may be used for 1-4 family structures that are not also occupied by the landlord.

For landlords with residential property containing from five to sixty units, a Businessowners policy (BOP) is usually appropriate. It insures buildings, landlord personal property, loss of rents (after a fire or other covered cause of loss), premises liability and medical payments.

Most Bed and Breakfasts do not qualify for coverage either in the homeowners or dwelling insurance program. Bed and Breakfasts will require a combination of tenants coverage for the resident owner/manager, and a BOP to cover buildings, landlord owned personal property in boarders' rooms, loss of business income (rents and fees) and the extra expense to operate (after a fire or other covered cause of loss), premises liability and medical payments.

For landlords who have office or retail tenants, the BOP provides broad coverages for buildings, landlord personal property, loss of rents (after a fire or other covered cause of loss), premises liability and medical payments.

Workers compensation is necessary for any employee. Talk with your agent. Most states require workers compensation for resident managers even if you provide only free lodging as payment. Make sure you have certificates of insurance for any subcontractors (painters, plumbers etc.) you hire to do work for you. If the subcontractor has no insurance, you may be responsible for the subcontractor's work-related injuries.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Home Businesses (Daycare/Schools)

A variety of businesses are routinely operated in homes. This article discusses aspects of particular operations. Refer to Home Businesses - Basics for background information on coverage as well as our other articles discussing different in-home businesses.

Daycare or In-Home Schools

Coverage for abuse or sexual assault for small schools is often difficult to obtain at a reasonable price. Limited corporal punishment coverage for teachers who are employed by a school system may be available from your homeowners carrier. If you are an independent tutor or run your own school, most homeowners policies cannot be modified to include corporal punishment. Abuse and corporal punishment may be available through the association(s) that specializes in your type of school.

While the company that writes your HO policy may be willing to add an endorsement to cover piano lessons, most will not want to cover a three-to-five child daycare operation. Liability coverage may be purchased separately. Coverage for property and liability can be provided through a Businessowners policy, but none of these forms includes professional liability or abuse or corporal punishment.

Specialty schools, such as ballet, sports, personal training, animal training, or horseback riding will require specialty coverage. Again, your trade organization, or independent agent can often find you coverage at a reasonable price.

Workers compensation is essential for any person you employ.

Driving students in private vehicles or bus-like vehicles poses special problems. You must hold a Commercial Driver's license if you haul more than 16 people including the driver. Your school is probably too small to qualify for standard business auto insurance. If standard coverage is unavailable, many states have assigned risk pools and other mechanisms to provide you coverage-sometimes at reasonable prices. A good independent agent will understand these markets.

Your state will also have laws regulating the transportation of students and these laws may require a special license when transporting fewer than 16 people. Subcontracting the driving does not lessen your responsibility for a whole raft of laws from vehicle accidents, workers compensation, ADA, and whether the driver has met the new substance abuse requirements.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Home Businesses (Retail)

A variety of businesses are routinely operated in homes. This article discusses aspects of particular operations. Refer to Home Businesses - Basics for background information on coverage as well as our other articles discussing different in-home businesses.

Retail - Persons with in-home retail operations must look beyond a HO policy for coverage.

The Businessowners policy (BOP) provides broad coverages for buildings, personal property, loss of business income and extra expenses incurred to remain in business (after a fire or other covered cause of loss), premises liability and medical payments. If you have more than $1,000 of goods in transit, you will need to add additional coverage. Goods stored at other locations must be added to the policy, normally as an additional location.

You will need workers compensation coverage for any employee - even part timers. You may need commercial automobile insurance if you deliver anything or if your vehicle is larger than a car, van or small pickup or if the vehicle is owned by a corporation.

Note: some insurance companies can offer amendments to your homeowners policy that can cover certain, in-home businesses.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Home Businesses (Wholesale)

A variety of businesses are routinely operated in homes. This article discusses aspects of particular operations. Refer to Home Businesses - Basics for background information on coverage as well as our other articles discussing different in-home businesses.

Wholesale - As a wholesaler, here are some coverage options for your consideration:

Businessowners Policy - If you are a manufacturer's representative with limited inventory, some insurance companies will cover your business with a BOP. A BOP provides broad coverage for buildings, personal property, loss of business income, extra expense incurred to remain in business (after a fire or other covered cause of loss), premises liability and medical payments.

If you have more than $1,000 of goods off-premises in transit, you will need to add additional coverage. Coverage for goods stored at other locations must be added to the policy.

Commercial Package Policy - If you cannot qualify for a BOP, your agent will probably have to build a special commercial package policy to meet your needs. You will need a competent commercial lines agent to help you. Commercial lines agents have both the expertise to design the appropriate coverage and the markets for your wholesale business.

Workers Compensation - You will need workers compensation coverage for any employee - even part timers.

Commercial Auto Policy - You may need commercial automobile insurance if you deliver anything or if your vehicle is larger than a car, van or small pickup, or if the vehicle is owned by a corporation.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Home Businesses (Service)

A variety of businesses are routinely operated within residences. This article discusses aspects of particular operations. Refer to Home Businesses - Basics for background information on coverage as well as our other articles discussing different in-home businesses.

Service

The following are the most commonly insured service classes of business by a Businessowners policy (BOP). A BOP provides broad coverages for buildings, personal property, loss of business income and extra expense incurred to remain in business (after a fire or other covered cause of loss), premises liability and medical payments. If you have more than $1,000 of goods off premises in transit, you should add additional coverage. Goods stored at other locations must be added to the policy.

The following are the most commonly insured service classes of business by a BOP. If your service business is not on this list, it probably will need to be insured by the individually designed commercial package policy or similar specialty policy.

  • Appliance and Accessories - installation, servicing or repair - Commercial or Household
  • Bakeries (with baking on premises)
  • Barber Shops and Beauty Parlors and Hair Styling Salons
  • Dental Laboratories
  • Engraving
  • Funeral Homes or Chapels
  • Laundries and Dry Cleaning or Dyeing Receiving Stations
  • Lithographing
  • Mailing or Addressing Companies
  • Photocopy Services
  • Photo-engraving
  • Photographers
  • Printing
  • Shoe Repair Shops
  • Tailoring or Dressmaking Establishments-Custom
  • Taxidermists
  • Television or Radio Receiving Set Installation or Repair
  • Watch, Clock and Jewelry Repair

If you cannot qualify for a BOP, your agent will probably have to build a special commercial package policy to meet your needs. Seek out a competent commercial lines agent to help you. Commercial lines agents have both the expertise to design the appropriate coverage and the markets for your service business.

You will need workers compensation coverage for any employee- even part timers.

Commercial automobile insurance should be pursued if you deliver anything or if your vehicle is larger than a car, van or small pickup or if the vehicle is owned by a corporation.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Home Businesses (Manufacturing/Contracting)

A variety of businesses are routinely operated in homes. This article discusses aspects of particular operations. Refer to Home Businesses - Basics for background information on coverage as well as our other articles discussing different in-home businesses.

Manufacturing

Manufacturing businesses cannot normally be insured by a Businessowners policy (BOP).

Find an agent and company that specialize in the kind of product you manufacture. Look for a company that will write your size business. Make sure you consider the impact of products liability claims, coverage for your products while they are in transit or at other processors, and products belonging to others that you are working on, whether at your business or at their location.

You will need workers compensation coverage for any employee - even part timers.

You may need commercial automobile insurance if you deliver anything or if your vehicle is larger than a car, van or small pickup or if the vehicle is owned by a corporation.

Contracting

Many companies have excellent "artisan" insurance packages for the small to medium subcontractor. Ask your agent to show you different artisan packages so that you can choose a program that fits your needs. Coverages may be similar among artisan packages, but rating plans vary. Some companies charge rates based upon payroll, sales or number of employees. As your business grows, you will want to ask your agent to shop your coverage to see whether it is to your advantage to change from one rating formula to another.

If you are a general contractor, you will need to work with an agent who specializes in general contractors. Contact your local builders association. Many builders associations will sponsor programs or know of agents who specialize in general contractors.

You will need workers compensation coverage for any employee - even part timers. If you hire any subcontractors, understand that you may be responsible for any injuries to subcontractors or their employees while they work for you. Make sure that you have certificates of insurance from each of your subcontractors for workers compensation, general liability and automobile insurance. It is to your advantage if your subcontractors have liability limits of insurance at least equal to your own.

You may need commercial automobile insurance if you deliver anything or if your vehicle is larger than a car, van or small pickup or if the vehicle is owned by a corporation.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Home Businesses (Farm/Ranch)

A variety of businesses are routinely operated in homes. This article discusses aspects of particular operations. Refer to Home Businesses - Basics for background information on coverage as well as our other articles discussing different in-home businesses.

Farms and Ranches

The homeowners program can be endorsed to cover some aspects of hobby or "gentlemen" farms, including farm liability and livestock collision.

Farming for profit will require a Farm or Ranchowners policy. Farm and Ranchowners forms can cover your dwelling, barns, sheds, silos, cribs and other buildings, machinery and equipment, supplies, liability coverage, additional living expenses after a fire or other covered cause of loss; some policies can be endorsed for livestock mortality. Crop insurance is a federal program, but local farm insurance specialists can provide crop hail and crop damage coverage. Your agent should help you design an insurance program that meets your specific needs.

You may own property that previously was used as a farm. Farm insurers understand rural homesteads. You may find better protection from an agent and company who specialize in rural and farm property. If you have large barns or other outbuildings, you may need to increase other structures coverage under your homeowners insurance or convert coverage to a Farm or Ranchowners policy. If you lease land to others for grazing or crops or hunting, you will need to add separate liability coverage to your Home or Farmowners policy.

Workers compensation laws for agricultural employees vary in each state. Each state has special rules for hired hands and migrant workers. Even if you are not required to carry workers compensation coverage for a specific employee, you may still be responsible for any-work related injury to that employee.

Farm vehicles normally can be covered through a personal automobile policy. Incorporated farms may require a commercial automobile policy.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

 

Home Businesses (Repairs)

A variety of businesses are routinely operated in homes. This article discusses aspects of particular operations. Refer to Home Businesses - Basics for background information on coverage as well as our other articles discussing different in-home businesses.

Repair: Auto, Bicycle, Boat, Tractors, Furniture, etc.

Don't expect your homeowners policy to give you coverage. Repair businesses work on personal property belonging to others. Your business probably will need to be insured by the individually designed commercial package policy or similar specialty form. Coverage for inventory, repair machinery, property of others, business income coverage after a fire or other covered cause of loss, and premises and products liability coverage can be built into your policy.

Look for a company that will write your size business. Make sure you consider the impact of products liability claims, coverage for goods that you are working on that belong to others whether at your business, in transit, at another processor or at your customer's location.

You will need workers compensation coverage for any employee - even part timers. You may need commercial automobile insurance if you deliver anything or if your vehicle is larger than a car, van or small pickup, or if the vehicle is owned by a corporation.

Work on autos will require an Auto Garage liability policy for the on-premises bodily injury, and auto dealers liability coverage to protect you against claims for damage to customer vehicles.

Racing: Car, Boat, Motorcycle, RV, Truck, etc.

If you are involved in racing vehicles or craft and, especially if you operate a business in building, servicing or repairing vehicles or craft from your home, you can’t rely on your homeowners policy for either liability or property coverage.

Coverage for damage to actual equipment that is raced is seldom covered. You will want to check with your agent or your racing association for coverage for shop equipment, portable tools, travel trailers and other equipment related to your racing hobby or business. You will also need liability coverage or, at a minimum, be sure that the racetrack has spectator liability coverage that applies to your race participation, including practices.

Racing Repair Business - Your business may need to be insured by a custom designed commercial package policy that may need to include coverage for inventory, repair machinery, property of others, business interruption, workers compensation (even for part-time employees) and premises and products liability

It's critical to identify if you need coverage against products liability claims that can arise from customer property you have worked on at your business, which may be transit, located at another processor or at your customer's location. An Auto Garage liability policy may be necessary to handle any on-premises bodily injuries and an auto dealers liability form can protect you against claims for damage to customer vehicles.

You may need commercial automobile insurance if you make deliveries, have a commercial-size vehicle, or if the vehicle is owned by a corporation.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.