In-Home Businesses
Homeowner (HO) policies aren’t meant to insure in-home businesses. HO premiums assume that coverage is for 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:
"Click" below for more information
Sales office
Professional office
Landlord
Daycare or in-home school
Retail
Wholesale
Service
Manufacturing
Contracting
Repair
Farms and ranches
Racing
Sales Office
Usually an HO policy does not offer much protection for business property. In fact, available coverage may be up to only $2,500 for personal property used for business and kept on the residence premises. Further, no coverage applies to business property such as inventory, product samples, or items being held for delivery. Finally, even optional coverage excludes property related to a business conducted on the premises. For example, you are a cosmetic sales rep who also holds make-up parties in your home. For customer convenience, you keep an inventory of cosmetics at home. The HO policy will not cover this property.
If you are a sales person operating out of your home and have limited inventory, some companies will cover you with the Businessowners policy. The Businessowners policy provides broad coverages for buildings, personal property, loss of business income and extra expense incurred to remain in business (after a fire or other covered cause of loss), premises liability and medical payments. If you have more than $1,000 of goods off premises in transit, you will need to add additional coverage. Goods stored at other locations must be added to the policy. If you cannot qualify for a Businessowners policy and a home business endorsement or separate policy fails to meet your need, your agent will probably have to build a special commercial package policy to handle your business. Commercial lines agents have both the expertise to design the appropriate coverage and access to the markets that offer policies for your sales business. You will need workers compensation coverage for any employee, even part timers, and, if you deliver anything or if your vehicle is larger than a car, van or small pickup, you may need commercial automobile insurance. Another reason for buying a commercial auto policy is if any auto is corporately owned.
Regarding doctors, attorneys, architects or similar occupations, whether your home office is your only office or simply a satellite office, you will need to work with an insurance agent who is familiar with the coverages that are appropriate for professionals.
Businessowners policies are suitable for most professional offices and can cover buildings, personal property, loss of business income, extra expenses incurred to operate the business (after a fire or other covered cause of loss), premises liability and medical payments.
Consult with your agent or your professional association(s) for professional liability and errors and omissions coverage. Back to More Information
Landlord
The homeowners policy is designed to cover
landlord occupied residential buildings, landlord owned personal
property, loss of rents (after a fire or other covered cause of
loss), premises liability and medical payments. Note that the maximum
occupancies that may be covered under an HO policy is a four-family dwelling.
A dwelling policy may be used for 1-4 family structures that are not also occupied
by the landlord.
For landlords with residential property containing from
five to sixty units, the Businessowners policy is usually
appropriate. It insures buildings, landlord personal property,
loss of rents (after a fire or other covered cause of loss), premises
liability and medical payments.
Most Bed and Breakfasts do not qualify for
coverage either in the homeowners or dwelling insurance program.
Bed and Breakfasts will require a combination of tenants coverage
for the resident owner/manager, and a Businessowners policy to
cover buildings, landlord owned personal property in boarders'
rooms, loss of business income (rents and fees) and the extra
expense to operate (after a fire or other covered cause of loss),
premises liability and medical payments.
For landlords who have office or retail tenants,
the Businessowners policy provides broad coverages for buildings,
landlord personal property, loss of rents (after a fire or other
covered cause of loss), premises liability and medical payments.
Workers compensation is necessary for any employee.
Talk with your agent. Most states require workers compensation
for resident managers even if you provide only free lodging as
payment. Make sure you have certificates of insurance for any
subcontractors (painters, plumbers etc.) you hire to do work for
you. If the subcontractor has no insurance, you may be responsible
for the subcontractor's work-related injuries.
Most personal automobile insurance will insure
cars, vans, and pickups used in business - business use, artisan
use. Larger trucks, backhoes and other contractors' equipment
will need separate coverage. Some contractor equipment can be
covered by the Businessowners policy, some by an auto policy.
Ask your agent how best to insure your equipment. Back to More Information
Coverage for abuse or sexual assault for small
schools is often difficult to obtain at a reasonable price. Limited
corporal punishment coverage for teachers who are employed by
a school system may be available from your homeowners carrier.
If you are an independent tutor or run your own school, most homeowners
policies cannot be modified to include corporal punishment. Abuse and corporal
punishment may be available through the association(s) that specialize in your
type of school.
While the company that writes your HO policy may be willing
to add an endorsement to cover piano lessons, most will not
want to cover a three-to-five child daycare operation.
Liability coverage may be purchased separately. Coverage for property
and liability can be provided through a Businessowners policy,
but none of these forms includes professional liability or abuse
or corporal punishment.
Specialty schools, such as ballet, sports,
personal training, animal training, or horseback riding will require
specialty coverage. Again, your trade organization, or independent
agent can often find you coverage at a reasonable price.
Workers compensation is essential for any person
you employ.
Driving students in private vehicles or bus-like
vehicles poses special problems. You must hold a Commercial Driver's
license if you haul more than 16 people including the driver.
Your school is probably too small to qualify for standard business
auto insurance. If standard coverage is unavailable, many states
have assigned risk pools and other mechanisms to provide you coverage-sometimes
at reasonable prices. A good independent agent will understand
these markets.
Your state will also have laws regulating the transportation of
students and these laws may require a special license when transporting
fewer than 16 people. Subcontracting the driving does not lessen
your responsibility for a whole raft of laws from vehicle accidents,
workers compensation, ADA, and whether the driver has met the
new substance abuse requirements. Back to More Information
Retail
Persons with in-home retail operations must look beyond an HO policy
for coverage.
The Businessowners policy provides broad coverages
for buildings, personal property, loss of business income and
extra expenses incurred to remain in business (after a fire or
other covered cause of loss), premises liability and medical payments.
If you have more than $1,000 of goods in transit, you will need
to add additional coverage. Goods stored at other locations must
be added to the policy, normally as an additional 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. Back to More Information
Wholesale
As a wholesaler, here are some coverage options for
your consideration:
Businessowners Policy - If you are a manufacturer's representative
with limited inventory, some insurance companies will cover your
business with the Businessowners policy, commonly called a BOP.
The BOP provides broad coverage for the following:
If you have more than $1,000 of goods off-premises in transit,
you will need to add additional coverage. Coverage for goods stored
at other locations must be added to the policy.
Commercial Package Policy - If you cannot qualify for a Businessowners
policy, your agent will probably have to build a special commercial
package policy to meet your needs. You will need a competent commercial
lines agent to help you. Commercial lines agents have both the
expertise to design the appropriate coverage and the markets for
your wholesale business.
Workers Compensation- You will need workers compensation coverage
for any employee - even part timers.
Commercial Auto Policy - 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. Back to More Information
Service
The following are the most commonly insured
service classes of business by a Businessowners policy. The Businessowners
policy provides broad coverages for buildings, personal property,
loss of business income and extra expense incurred to remain in
business (after a fire or other covered cause of loss), premises
liability and medical payments. If you have more than $1,000 of
goods off premises in transit, you will need to add additional
coverage. Goods stored at other locations must be added to the
policy.
The following are the most commonly insured
service classes of business by a Businessowners policy. If your
service business is not on this list, it probably will need to
be insured by the individually designed commercial package policy
or similar specialty policy.
If you cannot qualify for a Businessowners
policy, your agent will probably have to build a special commercial
package policy to meet your needs. You will need a competent commercial
lines agent to help you. Commercial lines agents have both the
expertise to design the appropriate coverage and the markets for
your service business.
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. Back to More Information
Manufacturing businesses cannot normally be
insured by a Businessowners policy.
Find an agent and company that specializes
in the kind of product you manufacture. Look
for a company that will write your size business. Make sure you
consider the impact of products liability claims, coverage for
your products while they are in transit or at other processors,
and products belonging to others that you are working on, whether
at your business or at their 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. Back to More Information
Many companies have excellent "artisan"
insurance packages for the small to medium subcontractor. Ask
your agent to show you different artisan packages so that you
can choose a program that fits your needs. Coverages may be similar
among artisan packages, but rating plans vary. Some companies
charge rates based upon payroll, sales or number of employees.
As your business grows, you will want to ask your agent to shop
your coverage to see whether it is to your advantage to change
from one rating formula to another.
If you are a general contractor, you will need
to work with an agent who specializes in general contractors.
Contact your local builders association. Many builders associations
will sponsor programs or know of agents who specialize in general
contractors.
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. Back to More Information
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. Back to More Information
The homeowners program can be endorsed to cover
some aspects of hobby or "gentlemen" farms, including
farm liability and livestock collision.
Farming for profit will require a Farm or Ranchowners
policy. Farm and Ranchowners forms can cover your dwelling, barns,
sheds, silos, cribs and other buildings, machinery and equipment,
supplies, liability coverage, additional living expenses after
a fire or other covered cause of loss; some policies can be endorsed
for livestock mortality. Crop insurance is a federal program,
but local farm insurance specialists can provide crop hail and
crop damage coverage. Your agent should help you design an insurance
program that meets your specific needs.
You may own property that previously was used
as a farm. Farm insurers understand rural homesteads. You may
find better protection from an agent and company who specializes
in rural and farm property. If you have large barns or other outbuildings,
you may need to increase other structures coverage under your
homeowners insurance or convert coverage to a Farm or Ranchowners
policy. If you lease land to others for grazing or crops or hunting,
you will need to add separate liability coverage to your Home
or Farmowners policy.
Workers compensation laws for agricultural
employees vary in each state. Each state has special rules for
hired hands and migrant workers. Even if you are not required
to carry workers compensation coverage for a specific employee,
you may still be responsible for any-work related injury to that
employee.
Farm vehicles normally can be covered through
a personal automobile policy. Incorporated farms may require a
commercial automobile policy. Back to More Information
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 the following:
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. Back to More Information
COPYRIGHT: Insurance Publishing Plus, Inc. 1996, 1999, 2001, 2002 All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc