Homeowners Insurance

The Truth about Homeowners’ Insurance

Many artists who own a home and have their studio in the home, an attached structure, or in another building on the same property, mistakenly believe that their homeowners’ insurance will cover their business property or their building if they suffer a loss.

Homeowners’ insurance rarely covers property used for business purposes. How do you know you are in business? Insurance companies define a business as any activity in which you accept money in return for goods or services. It does not matter if you do not have a business license, do not show a profit, or are trying to “fly under the radar.” If you sell something you make, you are in business.

Many homeowners’ insurance policies cover a small amount of business property, typically about $2,500.00 to cover a home office for people who spend part of their time working at home. It is intended to cover things like a computer, desk, and filing cabinets. Some companies sell special endorsements (riders) for in home businesses. Be sure to discuss this with your agent and be sure that they understand the size and nature of your business. If your operation is not to large or hazardous, you may also be able to buy an add-on supplemental policy with similar coverage to a Business Owner’s Policy (BOP).

Do not assume that the building in which your studio is located is covered, either. Operating a business in your home may violate the terms of your homeowners’ insurance policy, and in some cases may void your policy. Read your policy, and ask your insurance agent if you are covered (and get it in writing). By concealing the fact that you are operating a business in your home, you are only fooling yourself. CERF has seen many artists who learn after their studio has burned down that they have no coverage under their homeowners’ insurance policy.

Liability, liability, liability

Of even greater concern is that homeowners’ insurance does not cover liability for business activities, either away from your home or on premises. A typical business liability policy will follow you where you go such as to an art fair. Not only will a homeowner’s insurance policy not cover you away from home, if someone comes to your home to consider purchasing your work and falls on the steps, you will not be covered because this is considered business activity. That means that you are in liability limbo for the annual holiday studio tour!