Home-Based Businesses: Are You Properly Insured?

I recently read an article that reiterated how important it is for individuals who operate home-based businesses to be properly protected. In short, the article detailed how a participant in a Zumba class (which happened to take place at a fitness club ) suffered a stroke during the class. The instructor filed a claim with her homeowner policy and the claim ended up being denied.

The case ended up going to an appellate court in Arizona (which is where the situation occurred) and the jury found that the instructor’s activity at the club constituted “a trade, profession or occupation,” even though she was teaching on a very limited basis. This in turn affirmed the exclusion in the instructor’s homeowner policy that pertains to business activities.

The exclusion for business activities is something you will find in all homeowner policies, so it’s very important for anyone who operates a home-based business – no matter where the business is actually conducted – to obtain the appropriate liability insurance coverage.

As a general rule of thumb, if you’re engaged in a business where you earn more than $2,000 per year, you should consider obtaining a commercial general liability policy or a business owners policy (which will provide property coverage for your business property in addition to covering your business liability exposures) but the actual nature of your business may dictate otherwise so be sure to discuss with your local independent insurance agent.

Keep in mind that property coverage provided by your homeowner policy could also be in jeopardy if you are operating a business out of your home (this includes selling Mary Kay, AdvoCare, etc.). For example, homeowner policies contain specific “other structures” exclusions pertaining to business operations, so if you’re conducting a business activity out of a detached garage, shed, or barn, you might find yourself with no insurance coverage if that “other structure” is damaged or destroyed.

When in doubt, speak with your local independent insurance agent to learn more about how you can properly protect any property and/or liability exposures associated with a business you operate. Earning a little extra money on the side is great… until you realize you have no insurance coverage for it.

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