In-home businesses are not protected by homeowners insurance and may even reduce coverage on the home itself. But before you say, “I don’t run an in-home business,” consider whether you have a side gig. For many of us, they help cultivate creativity, maintain sanity, and even bring in a little extra cash. The gig economy is booming. That may be good, but coverage for outbuildings or garages can be compromised when they are used for business purposes or even if they simply store business property. If you operate any business from your home, take a minute to understand its additional risks and how it affects homeowners insurance.
What Is a Business?
If you are paid by others for a product or service, insurance companies consider that a business.
Why Is it Excluded?
Homeowners insurance policies are crafted assuming the home is used as a dwelling. They protect not only the home, but also the owners from personal liability. However, businesses bring a new set of risks that a homeowners policy is not designed to handle. Depending upon the business, those risks may be small enough to ignore or large enough to pose a significant threat. An artist that paints at home and sells their work at a local gallery may generate little additional risk whereas an in-home daycare brings a great amount. Thus, standard homeowners insurance provides no business liability protection, nor is it designed to cover business property.
This means that, should a homeowner be sued by a customer, homeowners insurance will provide no protection. Read your policy or consult your insurance agent. Below are exclusions from a popular policy.
- Business liability: The policy excludes, “Bodily injury or property damage arising out of or in connection with a business…”
- Other structures (separate garage, outbuilding, storage shed): “We do not cover other structures from which any business is conducted.” The exclusion goes on to read they do not cover, “Other structures used to store business property…”
To break this down using the in-home daycare example from earlier, should a visiting parent be injured while picking up their child, or their child be injured while at the home daycare, the homeowners insurance policy will provide no liability protection. Some policies go further and exclude professional services provided to others. Thus, if you are an accountant, lawyer, bookkeeper, or consultant working from home, homeowners insurance provides no protection for your errors or omissions.
Notice how the second exclusion says that if you conduct a business from an “other structure” (think garage, barn, or outbuilding), damage to that structure isn’t covered. Then the exclusion becomes even stricter. The policy may still exclude coverage if business property is simply stored in an “other structure”, regardless of whether a business is conducted from there. Some policies can contain similar exclusions for the home itself.
Common In-Home Businesses
Not all these common in-home businesses pose a threat, but consider your business operations and what additional risks they present.
- Artist, photographer, designer
- Writer, blogger
- Social media manager
- Website design, software coding, data entry, medical billing
- Teacher, tutor, online instruction
- Video production
- Pet sitter
- Hair stylist
- Etsy store, craft
- Airbnb, Vrbo (reference Home-Sharing Insurance: How to Insure Airbnb, Vrbo, Ordinary Rentals, and More)
Several in-home business insurance solutions are available. Talk to your insurance agent. A few homeowners insurance policies cover certain low risk in-home businesses, but that is not the norm. For many businesses operated from a home, inexpensive in-home business insurance policies are available. Other options are to obtain business insurance.
Questions on in-home business insurance? Contact your Bankers Insurance agent. We will help determine your risks and advise how to cover them. Not a client of ours? Let us earn 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.