In today’s challenging economic climate, with companies cutting back on their workforce, we find that many of our clients who have been affected by this have become very creative and resourceful. To put it succinctly, they are starting their own businesses right out of their homes to supplement their income so their bills can get paid. Garages, playrooms and even bedrooms are being converted into office space in order to run these business activities. We are finding these same clients are not aware that all Homeowner, Renters, Co-op or Condo policies contain an actual exclusion for any liability arising out of business activities of any kind. Not only is Liability excluded; but, additionally there is also very limited, if any, coverage for business property in the home as well.
The term “Business Activities” is not always so clear cut. The courts are full of instances where they have had to rule on the exact meaning of the term. There are specific features to a business activity:
(1) the hope that it will produce income; and
(2) the insured’s continuous participation in the activity constituting the business.
With reference to the desire to make money, that isn’t always applicable to the definition of the business since there are a great number of businesses that don’t get off the ground and others which never make any profit despite every effort made on the part of the entrepreneur to make it a success.
Remember, failure is not the inability to succeed; rather it really is the inability to try.
Here are some examples of In-Home Business Activities:
• Consultants – Attorney’s, Accountants, Organizers, Engineers, Architects, etc
• Whole Sale & Retail Sales: Cosmetics, Tuperware, Toys, Real Estate, Cookies, Bread, Home Renovations, Childcare, etc
• Manufacturing: Hand Crafted Jewelry, Baby clothes, Accessories, Clothing, Plaques, Furniture, Editing, Publishing, etc
The sole intent of a Homeowner’s policy is to provide coverage for all actions arising out of personal activities. There are, however, In-Home Business Endorsements which may be available to add as a rider to your existing Homeowner’s policies for only SOME of the business Activities listed above.
If you are lucky enough to have your small business grow to the point where you need to start hiring employees and /or purchasing extensive computer equipment, inventory and business furniture then you need to STOP RIGHT HERE! This is the time to call your insurance agent immediately as you may need a Businessowner’s Policy !
As the number of in-home business ventures explodes along with the need for supplemental income, we strongly suggest that you check your present Homeowners, Renter, Co-op or Condo policy for any limitations.
Speaking to your insurance agent on, at the very least, an annual basis to discuss changes in your occupation, or any other changes in your life or to your home for that matter, is vital to having all property and assets insured the way you want and need them to be insured. After all, that is what your agent is for---to assist you in covering your exposures to loss whether you recognize the need or not.
- Karen Skoler, CPCU