Home businesses are often excluded from home insurance policies or have inadequate coverage to cover the risks involved with owning a home business. In this chapter, you will learn about how owning a home business affects your insurance coverage and what coverages are available for your business under your home insurance policy.
You will also learn about the home business exclusions included in a typical home policy.
On a standard homeowner policy, there is no business liability. This means that, if any liability arises from your home business, no coverage for the liability will be afforded under your home insurance policy. Even if you are using a garage or detached structure on the property partially for business use, it is excluded under your policy.
Coverage for any personal property for your business may be
covered at low limits.
So what does that mean to a home business owner? If a client is hurt while visiting your home to discuss a business proposition or a delivery person is injured on your property while delivering a package for your business, these liabilities would be excluded. This is because, in both situations, the purpose for entering your property was business-related. This leaves you with the option of either paying out of pocket for the injury or facing a lawsuit. Injury caused to someone while you are conducting business outside the home would also be excluded.
Product liability is also excluded by the homeowner's policy. If your home business involves selling any product or service, any injury or damage caused by the product or service is excluded, leaving you open to substantial personal liability.
Worker's compensation is excluded on a home insurance policy as well. This means that, if you have employees working for or with you in your home business, there is no coverage if they are injured while assuming their job duties as your employees.
Professional liability is also excluded from home insurance policies.
Professional liability covers errors made by an individual who is
providing a service, such as a lawyer, accountant, insurance agent, or realtor.
There are limited business endorsements that can be added to your homeowner's policy. In many cases, these endorsements cover only businesses formed as sole proprietorships and provide a minimal amount of on-premises liability. Endorsements vary by state and by company, so check with your agent to see what business endorsements are available for your home business. If the adequate endorsements are not available, your agent can recommend a business policy that can fulfill your personal home business needs.