Know AAA

Insuring a home business

INSURANCE—Bob often takes work home when his workload gets heavy. He keeps some files in the garage, and a company-owned laptop and fax machine in the spare room. Mary's hobby is painting and she uses the basement as her studio and supply storage. Recently, Mary has started showing her work and has even been asked to sell some.

Do these homeowners need insurance coverage for a home-based business? If you answered "No," think again.

In the insurance industry, a business is defined as any activity engaged in for money or other compensation. It's a broad definition, and if a home suffers a loss and is found to have business use, the loss might not be covered by a standard homeowner's policy.

Bob's office equipment might not be covered in the event of a fire or other loss, especially since it's company-owned. If Bob's business files are stored in an unattached garage, homeowner's insurance might not even cover the garage.

Mary's hobby supplies are only covered to the amount specified in the Special Limits of Liability section of the homeowner's policy. If she drives her paintings to a fair to sell and they get damaged, they are not covered under her auto policy. Under the special limits coverage on an unendorsed homeowner's policy, they're covered only up to $500.

From an insurance viewpoint, you don't have to work full-time from home to be considered a home business owner. Some insurance companies offer an endorsement to the standard homeowner's policy to cover certain types of home-based businesses—check with your agent to decide what is best for your circumstances.