More and more people are starting home-based businesses for everything from marketing homemade products to keeping a home office for a consulting business. From an insurer’s perspective, this adds new types of risk to your home and, therefore, may require additional insurance.
Residential policies provide limited coverage on business property
Anything you use to carry on your home-based business, as well as your other possessions, is subject to the limits of insurance, and some things might not be covered at all.
- Separate Limits – Coverage for personal property, or your home’s contents, are usually insured on a blanket basis, meaning all claims for any property damaged or stolen is covered up to the stated policy limit. Some items have lower limits written into the policy wording itself, which limit the maximum amount payable for specific types of property or property losses. This list usually includes money, credit cards, watercraft, and business property, amongst others. Talk to your insurance broker for more details about the special limits of insurance on your policy.
- Limits on what is covered might completely exclude any special equipment that you keep in your home for business purposes.
- Items that are covered for business use are only covered while in the home.
So, for example, if the computer you use for your home-based business is stolen while on a trip, it will not be covered.
Some home businesses may require added liability insurance
The operation of your home-based business might mean that you have more people coming and going and, therefore, more risk associated with the activities in your home. If this is the case, not only will a basic liability limit of $1 million likely not cover you, some insurers might refuse to cover a third-party claim by a customer or employee who is injured in your home. If you think this situation applies to you, be sure to tell your broker about your home business and make sure your insurance company is made aware of your home-based business activities.
Consider augmenting your policy to give you more security
If you have high-value or business items that exceed the limits in your policy and you want to have them separately insured, you will likely have to have the items valued by a professional appraiser so that the insurer knows what level of coverage to set. Depending on the type of property and how much information you can provide, an estimate of value can be determined. There is a fee for this service.