Insurance when you work from home

Standard homeowners and renters policies contain business exclusions. They cover the residence and personal activities, not commercial ones.

With a large share of the workforce now working from home at least partly, the gap affects many more people than it used to.

What the exclusion covers

Business property. Equipment, inventory, samples and materials used for business are generally limited to a small amount at the residence, and less away from it.

Someone with substantial equipment — cameras, tools, computing hardware, stock — is largely uninsured for it.

Business liability. Injuries to clients, customers or delivery personnel visiting for business purposes are generally excluded.

A client who slips on your steps while visiting for a meeting is a business liability claim.

Professional liability, entirely excluded. Claims arising from your professional services require errors and omissions or malpractice coverage.

Loss of business income, not covered. If a fire makes the house uninhabitable, additional living expenses are covered and the loss of business earnings is not.

The employed-from-home situation

Different from operating a business.

Someone employed by a company, working at home on the employer's equipment, generally has less exposure — the employer's property is typically covered by the employer's policy and the employer's liability applies.

Points worth confirming:

Whether employer-owned equipment in your home is covered by the employer, since your policy generally excludes property of others held for business.

Whether your own equipment used for work is covered, which under a strict reading of the business exclusion it may not be.

Whether visitors related to work create a liability issue, which for a purely remote employee is usually minimal.

Most insurers take a pragmatic view of remote employment. Ask, and get the answer in writing.

The options

A home business endorsement to the homeowners or renters policy.

Increases business property limits and adds limited business liability.

Inexpensive and suitable for low-risk businesses with few visitors and modest equipment — consulting, writing, online sales at small scale.

Limits are generally modest, so check they are adequate.

A business owners policy. A packaged commercial policy combining property, general liability and business income coverage.

Appropriate for businesses with meaningful equipment, inventory, employees or client visits.

More expensive and much broader.

Standalone commercial general liability, where liability is the main exposure.

Professional liability, for anyone providing advice or services where a client could suffer financial loss from an error. Consultants, designers, accountants, therapists, contractors, and many others.

This is not covered by any personal policy and is frequently required by clients contractually.

Cyber liability, for anyone holding client data. Increasingly relevant and increasingly required by client contracts.

Commercial auto, if a vehicle is used for business beyond commuting.

Workers compensation, if you have employees, which is generally mandatory.

Assessing your own exposure

Four questions.

Do clients, customers, employees or suppliers come to the property? If yes, you need business liability coverage.

How much business property is at the residence? Total the equipment, inventory and materials. Compare against the policy's business property limit, which is typically small.

Could a client suffer financial loss from your work? If yes, professional liability.

Would a loss to the property stop your income? If yes, business income coverage.

Other considerations

Zoning and permits. Many municipalities restrict home businesses — signage, client visits, employees, deliveries, vehicle storage.

Homeowners associations frequently have their own restrictions.

Operating in breach of zoning can affect insurance and creates its own exposure.

Landlord permission, for renters. Leases frequently prohibit business use, and operating in breach can void coverage and the tenancy.

Disclosure. Tell your insurer what you are doing.

Non-disclosure is the reliable route to a denied claim, and insurers do ask about business activity at renewal.

The premium for appropriate coverage is generally modest. The cost of an uncovered liability claim is not.

The tax point, briefly

Business insurance premiums are generally deductible as a business expense, which reduces the effective cost.

Home office deductions have their own rules and interact with the insurance question only loosely, and a tax professional is the right source.

General information about insurance concepts, not insurance, legal or tax advice. Policy exclusions, endorsements and local regulations vary. Consult a licensed agent and read your policy.