A home office can be a wonderful thing, sipping your morning coffee and deleting pesky emails while still wearing your PJ’s and bunny slippers. Over the years, you might even amass a valuable collection of computer equipment and assorted office paraphernalia to outfit your home office just like the ones in the magazines.
Your Home Insurance Might Not Cover Your Home Office
Homeowners insurance companies are all business, but that doesn’t mean they’re home-office friendly. In fact, they can be a bit persnickety about covering business-related claims on a personal policy.
Generally speaking, home insurance companies have no sense of humor — except those guys with the funny commercials — but they won’t cover some business-related claims either.
Your home insurance policy provides coverage for personal property, your personal belongings. If your computer and office equipment are owned by you as opposed to being owned by your business, you might find some coverage for your office equipment and furnishings — but the coverage limitations might surprise you.
A typical home insurance policy only provides up to $2,500 of coverage for business property. Some insurers provide an option to double the coverage amount to $5,000. But even with that, the key words are “up to”.
Personal property is usually covered for actual cash value (ACV). Actual cash value is an adjusted value based on wear and tear due to age, meaning your equipment began depreciating in terms of insured value as soon as you opened the box. Again, some insurers offer an option to cover your property at full replacement cost — at a price.
If you’ve invested a significant amount in your home office and equipment, you’ll want to check your coverage with your agent to see if any adjustments are needed.
Most home insurance policies also provide at least $100,000 in personal liability coverage, and many policies have $300,000 in coverage — or more. That’s not a bad start, but it’s likely that the coverage won’t extend to business-related activities.
A potential loss of office equipment is small relative to the risk of a liability lawsuit, which can range from a client injury to a cyber breach. A lot of people think of lawsuits as things that happen to other people — until one happens to them.
Some insurers offer a rider (an add-on) that extends some liability coverage for businesses that have relatively few visitors, like writers.
Home Office And Home Business Options
Depending on the type of business activity that takes place in your home office, you have some additional options to provide the coverage you need.
- In-Home Business Policy: This type of policy is a step up from home insurance coverage patched with riders. Additional coverages can include broader liability coverage, off-site business property coverage, and loss of use, which pays for a temporary working space if a covered claim leaves your home office unusable.
- Businessowners Policy (BOP): A BOP is another step up from the lower levels of coverage offered by other solutions. You can think of it as a solid foundation to build a full-coverage solution as your business grows. Premium costs are usually based on revenue, so a smaller business with less risk will pay less — and additional policies can be added if you need specialized coverage.
Your agent is your starting point to understand the coverage you have for the type of business activity you do. However, if you need to step up the coverage to another type of policy, get a few quotes.
Companies that focus on personal insurance, like home insurance, don’t always have the best solution for business-related insurance.
Also published on Medium.