Is Your Home a Business, Too?

A home is a home, until it’s more. Home offices, home-based businesses, hobbies that turn commercial—how your living quarters are defined can affect your insurance coverage.

It can be easy for a home-based activity to evolve into paying work, or for you to incorporate an office, studio or workshop into your home, based on a job change or retirement. Yet people are often surprised to learn that standard homeowners insurance policies don’t cover business activities in the home. Most policies don’t cover lost data, lost income or liability. That can put you at risk in case of theft, accidental damage, vehicle accidents and on-site injuries. If you think of the amount of inventory, equipment or finished work included in your home-based commercial activity—and then imagine that loss, you’ll understand that you should look carefully into the coverage you might need.

The Landlord Business

Thinking of renting out some of your home or another property to vacationers, students or anyone else? Programs like Airbnb have expanded the possibilities for revenue, as well as the potential for problems and liabilities. You will want to confirm with your insurance agent that any rental activity is covered under your current policy before listing your space.

Renting out your primary residence regularly for short periods could constitute a business, requiring a hotel or bed and breakfast policy. (There are other considerations, too, such as local codes or taxes.) If you’re planning to rent out your home for a longer period of time, such as six months or a year, you will likely need a landlord or rental dwelling policy. The same is true for renting out a vacation home or investment property. Many landlords also expect their tenants to buy renter’s insurance.

Have fun with making the most of your home, but be sure to protect your investment. Crafting or consulting, leasing or selling—any commercial use in your home requires a good conversation with your local independent agent.