Many homeowners enjoy sharing their passions through teaching, building community, or providing services to others. Maybe you are a wildlife conservationist and enjoy leading Saturday ecotours on estuaries of the Chesapeake Bay. Or perhaps your interests are creative in nature and you operate a cosmetic or photography business. Others may be tech-savvy and support local businesses by providing website services. No matter your motivations, you aren’t alone. The gig economy is growing. However, running a home-based or hobby business requires specialized insurance, gig insurance, to cover associated risks.
What Qualifies as a Business?
Generally, if a fee is charged, that constitutes a business operation and any associated liability is not covered by a homeowners insurance policy. If you are operating your business under an entity such as a limited liability company or partnership, any related activity needs business coverage. Any equipment or property used in the business is excluded as well. Still speaking in generalities, if no fee is charged and your involvement is voluntary in nature, coverage is included under a home insurance policy.
As an explanation, lets return to our wildlife conservationist example. Assume I am an ardent bird watcher living on Chincoteague Island and enjoy taking neighbors to the local bird sanctuary during migration seasons. If I lead my group down a trail to capture a photo of a white egret atop a wild pony, only for us to be trampled by the entire spooked herd, my homeowners insurance would protect me should my newly un-friended neighbors sue for negligent endangerment. However, if I charged a fee for my guide services, I was operating a business, my homeowners insurance would not apply, and I would be financially unprotected in a court of law.
Freelancing, Consulting, and Working from Home
The gig economy has empowered many to work on a mobile basis. Freelancers may only need a WiFi connection and consultants can conduct business from their home. Many mistakenly believe that because they never leave home on business, their homeowners policy protects them. However, no matter where a business is conducted, homeowners insurance significantly limits or outright excludes coverage for equipment, property, and liability.
Why Does Home Insurance Not Cover Gigs?
A standard home insurance policy defines what constitutes a business and then excludes associated risks. This is because businesses introduce new risks and courts hold businesses to a higher duty of care. These risks are properly covered by business insurance. As an illustration, below are excerpts of one popular homeowners insurance policy, but most policies are similar.
- A business is defined as “A trade, profession or occupation engaged in on a full-time, part-time or occasional basis” or “Any other activity engaged in for money or other compensation”.
- It goes on to state it does not cover “Other structures from which any ‘business’ is conducted…”
NOTE: Thus, if you conduct a business from a separate garage or outbuilding, that garage or outbuilding is not protected.
- Finally, it states liability protection does not apply to “business” and includes several clarifying statements.
But whether you’re a hobbyist or a small business owner, don’t operate bare. Gig insurance is available!
Property and Liability
If your gig includes the use of equipment, such as computers or cameras, the above exclusions mean they are not covered by a standard homeowners policy. In addition, should you damage something or injure someone in the course of your business, that is not protected either. Options include:
- Endorse (add to) your existing insurance policy to include the appropriate protection. Some home insurance companies allow this for smaller businesses.
- Obtain a separate business insurance policy. This can be as simple as a separate home-based business policy, or a robust property, general liability, or similar policies.
If someone helps you in your business, even if you pay them only once, courts will consider them your employee. To protect yourself against an employees suing you for a work-related injury, and to ensure your employee is properly reimbursed, a workers compensation policy is required.
It is important for business owners and hobbyists engaged in the gig economy to determine if their activities qualify as a business. If so, contact us for advice on how to thoroughly protect your home as well as business operations. For homeowners insurance questions, contact your Bankers Insurance agent. Not a client of ours? Let us compete for your business! Each of our clients is assigned a personal insurance agent and provided their email address as well as a phone number that rings right on their desk.