Covering Business Property at Home

Homeowner’s policies are designed for residential – not business – risks, so it’s no surprise that coverage for business personal property is minimal – typically $2,500 at home and $250 away. Also, there is usually a complete exclusion for business data – both on paper and electronic media.

The definition of business in most homeowner’s policies clearly includes your regular job. But does it include part-time jobs, home babysitting, or summer lawn jobs? Unfortunately, that’s subject to interpretation. Because the policies are vague, the courts have gotten involved: They’ve defined business, as
used in homeowner’s policies, to mean an activity that both earns revenue and is continuous.

So, a once-a-year garage sale would not be a business. But my friend Bobbie’s garage sales, which she’s conducted out of her garage for the whole neighborhood, once a month for 20 years, may be a business, and the $2,500 limit would apply. Similarly, your 12-year-old son’s use of your $600 lawnmower to do a few summer lawn jobs probably isn’t a business because it’s not continuous. But your 18-year-old son’s $10,000 investment in landscaping equipment, pulled on a utility trailer and used year round, may be a business.

If you have an incidental home office (with a desk, filing cabinet, computer, fax, and so on) and you telecommute from your regular job, you’re also subject to the business-property limitations of the policy.

If the business property coverage that comes with your homeowner’s policy (typically $2,500) is enough to replace all you own or use at home and you never take for-business items off-premises, you’re set. Just remember to read your policy and make sure you know what the dollar limit is.

If some of the business property at your home is owned by your employer and furnished for your use, see if your employer is covering it already or can cover it. You won’t need supplemental insurance if the items are already covered.

If you own substantially more than $2,500 worth of business property, or take more than $250 worth of business property away from home, or if you have a lot of business data at risk, here are some things you can do:

  • If you have more than $2,500 at risk at home, increase your business property on-premises coverage high enough to cover your exposure.
  • If you take more than $250 worth of business property out of your home, try to reduce the risk by taking less. Home insurers seldom offer an option to buy a higher limit. If they do, it’s pretty pricey. The one exception is laptop computers. If you own a laptop, you can avoid the $250 limit by scheduling the laptop – a strategy I recommend for every laptop owner. Be sure to include a business-use endorsement and get special perils coverage, because computers can be damaged easily through a variety of causes. The cost is only about $5 per $1,000 of coverage, with no deductible.
  • If you have business data at risk, the best strategy is to back up your data. Sure, you can buy optional data coverage when you schedule a computer, but re-creating lost data is such a hassle! You’re better off backing up and storing a copy of the backup away from home.