Homeowners' policies are meant to provide coverage for things you do or own personally. Commercial policies are meant to provide coverage for business endeavors. When you combine these two activities from the same location, you've got some serious homeowner's insurance problems.
The coronavirus pandemic brought a seismic shift in how and where people work. Businesses closed their physical doors forcing workers to start their day from kitchen tables, basements, spare rooms, and garages. Unemployment soared and laid-off workers found creative ways to earn a living, largely from the confines of their personal residence. These resourceful entrepreneurs rented out rooms, watched neighborhood children from their homes, started a construction trade, repaired small engines, cleaned out their closets, and sold just about anything online.
This rapid transition of work makes us admire the adaptability of our fellow Americans. What scares us is their unendorsed homeowner's policies.
Business at Home: What's the Big Deal?
Before we talk about limitations on a homeowner's policy, we first need to tell you how your insurance carrier defines a business because it may surprise you. Typically, a homeowner's policy will define business as "a trade, profession, or occupation engaged in on a full-time, part-time, or occasional basis." Every word in that definition has a significant meaning. What you may consider part-time or a hobby, your homeowner's policy considers a business.
So what's the big deal about having a business from your home? Well, actually, there are several.
Liability
Homeowner's policies typically exclude business being conducted from your home, and only give coverage if the operation is incidental, approved by the underwriter, and added to your policy. Considering the homeowner's policy has such a low bar for what's considered to be a business, that's quite a broad exclusion.
Examples of incidental, home-based businesses are accounting, tailor/seamstress, data entry, editing, and bookkeeping. Another way to think about the types of incidental operations are activities with minimal-to-no public foot traffic coming to the home.
If someone comes to your home for your business, or if you're away from the home conducting business and you've caused some type of injury, without some type of commercial coverage (either endorsed on the home or a separate policy), there is no insurance protection.
Property (i.e buildings and the stuff inside them):
When your boss sent you home to work remotely, did you discuss who is responsible for all of that office equipment you took with you? Additionally, what office equipment have you bought since working from home that you personally own? If it's used for business, there are coverage limitations.
Business Personal property
- Homeowners' policies offer limited coverage for Business Personal Property in the home. Unendorsed policies often provide only $2,500 in the home and $500 away from your premises. Examples of business personal property include laptops, monitors, printers, scanners, VOIP phones, modems, office chairs, etc. An office set up can easily cost $10,000.
Detached Structures
- If you have a detached structure that's used for business or as storage for business items, there is no coverage for either the business contents OR the detached structure itself! Common examples can be an office above a garage or a detached building used to store tools and equipment in a construction business. That's a major and costly exclusion!
Just how big of a deal are these business exclusions and limitations from the homeowner's policy? Well, if you don't have coverage added to your homeowner's, or a separate commercial policy, there's no coverage. Your largest asset, your home, could be at risk with no insurance protection.
While it's a serious exclusion, take a deep breath. Do you really think we'd let you know of problems if we didn't have a solution? If any of this article caused you to question your situation, just call us! We'll learn the details of your personal scenario and work with your insurance carrier to make sure that you have the proper coverage. Often, the solutions are simple and relatively affordable, but you have to let us know first.
What Should Employers Think About?
While the focus of this article is for homeowners, if you're an employer reading this post/blog here are some questions you should think about, too:
1. Should the employee be injured while working from home, are there concerns with coverage from your workers' compensation policy? Do any employees live in a state that is different than where your business is domiciled?
2. Should the employee be engaging in the use of the employer's IT infrastructure - this includes the use of hardware, software, or accessing data - while working from home, are there any concerns with coverage under your cyber policy? Do you even have a cyber policy??
3. Should the employee be provided the ability to use from home any property owned by the employer - such as a computer, equipment, or inventory - are they any concerns with coverage under the business commercial property policy?
4. Should the employee be asked by the employer to store any property of the business at the employee's home, note the coverage limitation applicable to the Others Structures as discussed above.
Conclusion
We hope this article has shed light on some issues you may not have otherwise considered. Please know that this is not a legal opinion, and rather a general background regarding the topic we discussed. If you have any questions about how your at-home business may affect your homeowner's policy, or how your employees may be affected by remote work, please don't hesitate in reaching out to us. That's what we're here for!
Source:
Some content from this article came from the September Primary Agent magazine, "Working From Home: No Issue With Property Coverage...Until There Is" By Kevin C. Amrhein, CIC