The Producer Online In Action—January 2011

In-Home Businesses - Part One

Homeowner (HO) policies aren't meant to insure businesses that are run out of a home. The premiums paid for homeowners coverage is based on having to handle the chances of loss that are 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, an 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 make copies of your business proposal and, on the way to the copy center, 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 a 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.

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In-Home Businesses - Part Nine

Many different activities are routinely run out of homes. This discussion reviews aspects of particular operations. See part one for background information on coverage basics as well as the other parts discussing different 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 Garagekeepers 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 not 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 an 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 a garagekeepers 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.