Many people operate some kind of business from their home. Did you know that your homeowner's policy has severe limitations in regard to business pursuits? Some policies will allow you to purchase an endorsement for additional coverage, but even then, the amounts are usually very low. We now offer home business insurance policies that offer terrific coverage for your property as well as liability protection for you and your auto. There are three areas of exposure when it comes to a home based business: property, liability, and automobile liability. After reading the information below, you can see that it is worth it to protect yourself and your business with a home business policy.
Property
Property loss has two components, loss to the structure and loss to the contents. Under coverage A (dwelling) of a homeowners policy incidental business use is permitted as long as the primary use of the structure is as the residence of the named insured. An extra bedroom or an attached garage converted into an office would fall into this definition.
Structures that are not physically attached to the dwelling are covered under coverage B (other structures) of the homeowners policy. The homeowners policy excludes coverage under coverage B for structures "used in whole or in part for business." Connection by fences, electrical lines, and plumbing does not constitute physical attachment.
Contents coverage is provided under coverage C (contents) of the homeowners policy. Coverage C of the homeowners policy places a limit on property used at any time or in any manner for any business purpose." In addition, the homeowners policy has a sub limit under coverage C for electronic any apparatus that "is used at any time or in any manner in business." Electronic apparatus would include computers, fax machines, copy machines, and any electronic media or accessories used with them.
The homeowner's policy specifically excludes coverage for business data. Business data as defined, can be books of account, drawings or other paper records; electronic data processing tapes, wires, records, discs or other software media. The credit card, fund transfer card, forgery, and counterfeit money coverage provided by the homeowners policy does not apply to loss "arising out of business use." If you accept counterfeit money as change at a local grocery store the homeowner's policy would cover your loss. If you accept counterfeit money as payment from one of your customers the homeowner's policy would not cover your loss.
The determination of what is and what isn't business property can vary. Generally all the furnishings in a room used as an office should be considered business property, regardless of why they were originally purchased. For example, an end table that was in your living room for years that is now used in your office as the work surface under your fax machine would, generally, be considered business property.
Liability
The second area of loss exposure connected to a home business is general liability. A homeowner's policy provides personal liability coverage. Coverage E (liability coverage) of the homeowner policy is designed to cover the liability arising out of the use and maintenance of the described premises as the insured's residence as well as the personal liability of the named insured and his family members. This section also covers the insured and his family members for non-employment related liability off premises. The homeowner's policy excludes liability "arising out of or in connection with a business engaged in by an insured." Liability "arising out of the rendering of or failure to render professional services" is also excluded. Liability for damage to property of others "arising out of a business engaged in by an insured" is also excluded.
Under coverage F (medical payments to others) of the homeowners policy, liability "arising out of or in connection with a business engaged in by an insured" is excluded. If Aunt Sue falls down the front steps, while visiting you, the homeowner's policy would provide medical payments. If your best customer falls down the front steps, during a business call, the homeowner's policy would not provide medical payments.
Automobile Liability
The third area of loss exposure associated with a home business is automobile liability. The personal auto policy was designed to insure the named insured and family members, as defined in the contract, for the ownership and use of described and defined automobiles. It was not designed to provide coverage for a business. The personal auto policy covers autos owned by the named insured, shown in the declarations, and any non named spouse provided that spouse is a resident of the named insured's household. Vehicles titled in the name of your business should be insured on a business auto policy. If you buy a new vehicle that is titled in the business name, the newly acquired vehicle provisions of the personal auto policy are not applicable. For example, all of your current vehicles are titled in your name, you purchase a new vehicle and it is titled in the business name. Until you buy insurance specifically for that new vehicle, you are uninsured.
The personal auto policy exclude property damage to "property owned or being transported." Also excluded is "property damage to property rented to; used by; or in the care of" the insured. If applicable, you would have only the limit provided by your homeowner's policy, for business property off premises, to cover such a loss. Under a business auto policy, cargo coverage is an available optional coverage. Passengers in your vehicle may receive payment under bodily injury and medical payments of the personal auto policy in some circumstances. However, coverage is not provided for "bodily injury to an employee during the course of employment".