What Home Business Owners Get Wrong

February 24, 2015

home business

image courtesy of iosphere/freedigitalphotos.net

We’re in the internet age where it’s easy to do business from home. Whether you are a consultant, life coach, or even selling tangible products, the Web allows you to do business all over the world right from your desktop or laptop.

Here in the New Hartford area we are finding more of our customers are self-employed and work from home, including our “retired” clients. In fact, the U. S. Department of Labor issued a report that found more older Americans are transitioning from career jobs to self-employment. And many of them are also working from their home office.

But what happens if one of your clients slips and falls at your home while your are counseling them? And what if you’re sued for damages your product or service causes someone else? Your Homeowners Insurance policy is written for personal liability lawsuits, not business.

So if you’re doing business at home…

It’s a Big Mistake to Count on Your Homeowners Insurance for Any Home Business Liability

Your homeowners insurance policy is comprehensive when it comes to property and liability insurance, but it’s meant for situations that occur to you and your family in your personal lives. If there’s a fire in your living room, for example, your furniture, glassware, and the room itself are all covered because they exist for your personal use.

And if a neighbor is paying you a visit for coffee and trips and falls in your house and sues you, your homeowners policy would respond because the incident happened through the course of everyday personal life.

But your homeowners insurance policy is not only not intended to cover your business pursuits, it explicitly excludes them.

Here’s how most homeowners insurance policies exclude business for lawsuit coverage (Liability):

“Coverage E – Personal Liability and Coverage F – Medical Payments to Others do not apply to bodily injury and property damage: a. which is expected or intended by any insured; b. arising out of business pursuits of any insured or the rental or holding for rental of any part of any premises by any insured.”

The other liability exposure you would have as a business is for claims from the rendering or failing to render professional services. This means that you’re sued for failing to perform or maybe giving bad advice to a client. This would be a professional liability or errors and omissions lawsuit.

So it’s clear that if you’re sued for any business pursuit no matter where it is, your homeowners insurance policy will not cover you for the defense costs or any judgments against you.

You Have Some Coverage for Your Home Business Property

Most home businesses have at least some business equipment, usually a computer, printer, and furniture. But there may also be products held for sale and/or sales samples.

The homeowner insurance policies we offer our clients usually cover business property on your premises for up to $2,500. This includes property in storage for sale or as samples. And it includes business equipment. It may also offer $250 for business property away from the premises, such as sales samples when you’re on the road.

Even though there may be some coverage for your business property on your homeowners insurance policy, the exclusion for liability should be the red flag that prompts you to call us at Scalzo, Zogby & Wittig for a solution.

One thing we can do is add liability and some additional property coverage with an HO-42 endorsement (an endorsement is an addition or change to the policy). This eliminates the business exclusion to include some liability for lawsuits that happen as a result of your home business.

Adding an endorsement to your homeowners insurance policy might be appropriate for a very small business. But we also carry home business plans that are comprehensive and very inexpensive. Not only can you get business property and liability coverage, but our home business plans also include Business Income and Extra Expense and comprehensive coverage on your computer equipment.

But many of our clients are operating much larger enterprises from their homes with more exposures than a simple endorsement or Home Business Policy can handle. In this case, we represent insurance companies with low cost, high coverage Business Owners Policies that package all the coverages a business needs at an affordable price.

So, if you run a business from home, whether part or full time, don’t rely on your homeowners insurance policy, call us. Since we represent over 20 plus insurance companies, we can find the right business insurance for you.

Until next time,
Your SZW Team

Scalzo, Zogby & Wittig, Inc. is your New Hartford area independent insurance agent. Call us for a quote on insurance for your home, car, business, or life at 315.792.0000.