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Topics in Homeowners Insurance
Homeowners Insurance Coverages in Plain English
Who needs insurance industry jargon? Read this to get an explanation of your homeowners insurance coverages in plain English.
What Is Replacement Cost?
Why does your agent have your policy for a different amount than your house is worth? Read this article to learn why the amount of insurance
on your homeowners policy is completely unrelated to the value of the house.
Presrving the Value in Your Valuables
Do you know if your homeowners or renters policy will cover your jewelry, electronics, or computer equipment? Do you know if they will be
replaced at the full value, or if the payment will be reduced for depreciation? Do you know if they are covered if they are stolen, lost, or broken?
Avoiding Insurance Nightmares with Vacant Homes
You have taken care of your home all these years, but now you have moved and the house is vacant. Do you know what changes on your insurance coverage
when the house is vacant? More importantly, do you know how to prevent uninsured losses? Read this to learn about vacancy insurance.
How NOT To Lose Your Home-Based Business
About three out of every ten people operate some sort of home business. Their businesses vary widely, and so do their insurance needs.
But they have one thing in common: A typical homeowners policy probably does not cover their businesses the way they think it does.
Flood and Water Damage: What Does a Homeowners Policy Cover?
Water damage is tricky on a homeowners policy, because the answer is, "It depends." It depends on where the water comes from, and what it damages.
It also depends on your company and your policy. Are you covered for storm damage? Frozen pipes? Flood? Find out here!
So Why Didn't Her Policy Pay the Cost To Satisfy the Building Codes?
Most homeowners policies reimburse you
only for the same quality of roof as the one that was damaged. What if building codes have changed since your home was built, and now you are
required to meet a higher standard? How can you make your policy pay the difference? Find out here!
Five Ways To Protect Your Home from Winter Storm Dangers
We hope you don't experience a storm-damaged roof, leaking basement, or frozen pipes this winter. Nobody wants to
go through that. Here are five very smart ways you can prepare for winter, either to avoid damage, or to be prepared
if it happens despite your preparation.
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Insuring a Home-Based Business: Why Most Home-Based Businesses Could Go Up in Smoke
 Christy M. Perry, President
Community Insurance Center, LLC
Do you have a home office? Do you sell cosmetics, household goods, or other merchandise on the side? About three out of every ten people operate
some sort of home business, according to the U.S. Bureau of Labor Statistics. These businesses range from full-time independent consultants to in-home day care
providers to home-based sales reps for cosmetics and household goods. Their businesses vary widely, and so do their insurance needs. But they have one thing in common:
A typical homeowners policy probably does not cover their businesses the way they think it does.
Many homeowners will be surprised by this answer. A typical homeowners policy does not cover most losses
caused by the operation of a business.
Many homeowners will be surprised by this answer. A typical homeowners policy does not cover most losses caused by the operation of a business.
This is because a homeowners policy was not designed to cover commercial exposures. It was designed to cover personal exposures.
This does not mean that the homeowners policy is defective, or that the company is trying to avoid paying claims. It just means that it is the wrong type
of policy for the circumstances. There are other policies that will provide the right coverage for a home-based business.
- If your sister is visiting and falls on the stairs, her injuries are covered. If a client is visiting and falls on
the stairs, his injuries are not covered.
- If a fire destroys your living room and your sofa, television, and coffee table are lost, they are covered.
If a fire destroys your home office and your computer, printer, fax machine, and desk are lost, there will
be only a limited amount of coverage.
- If you make candy at home and sell it to other people, and your customers become ill, your homeowners
policy will provide no coverage at all.
These are some pretty shocking examples. Let's go into a little bit more detail, because a homeowners policy covers several types of losses.
Keep in mind that policies vary from company to company, and from state to state, so you should consult with your local agent to
determine exactly what coverage you have and what adjustments you might need to make. These are some general cases about homeowners policies,
but only your agent can tell you if they apply to your own homeowners policy.
What Is Covered?
First, let's look at what might be covered:
- The House. Most homeowners policy will pay for damage to your home that is caused by something that
happens in your home business. If you make glass beads in a furnace, for example, and the furnace
causes a fire in the house, most policies will pay for the fire damage to the house. This is because the
more common homeowners policies provide "all risk" coverage on the house, except for specific causes of
loss that are not covered. (Typical homeowners policies do not cover losses caused by flood, for example.
You need a separate flood policy for that. Most homeowners policies do not cover losses caused by
earthquake unless have you a special endorsement. There are a few other causes of loss that are not
covered. Be aware that this is not true for all policies, so it is very important that you either read your
policy, or ask your agent to explain them to you.)
- Personal Property Used for Business. "Personal property" means other items, not part of the
building—things such as furniture, equipment, parts and supplies, a computer, software, data or records.
Most policies include a limit on how much is covered, such as $2,500 (if the items are at the residence at
the time of loss), or $250 or $500 (if the items are away from the residence).
What Is Not Covered?
There is a longer list of things that are not covered:
- Other Buildings. Most homeowners policies include additional coverage for other buildings that are not
connected to the dwelling, such as a detached garage, shed, or workshop. However, most homeowners
policies do not cover a building that is used for business purposes, or that is used as a storage building
for some types of business property. If you have a separate building in the back yard that you use as a
studio or workshop to make glass beads for sale, that building might not be covered.
- Personal Property Used for Business. As described above, most policies have a limit on the amount
of coverage for other items, not part of the building, that are used in the business. Anything more
valuable than that limit is not covered.
- Business Data. Most policies do not cover business data, such as accounts receivable records or
customer lists, whether stored on paper or on your computer.
- Other Miscellaneous Coverages. There are other miscellaneous coverages which are normally
covered, but are not covered if they arise out of business purposes, such as damage to trees and
shrubs; or losses due to credit card, ATM card, forgery, or counterfeit money.
- Bodily Injury or Property Damage. Homeowners policies include coverage for injuries to other
people, such as if someone slips and falls on your property; and for property damage to property of
others for which you are responsible. However, most policies do not cover bodily injury or property
damage arising out of your business operations. In other words, if a customer comes to your house to
pick up some merchandise, and he slips on the sidewalk or on the steps, his injuries probably won't be
covered by your homeowners policy.
- Products Liability. If you make a product and sell it, and that product harms someone, you might be
held responsible. This can happen long after the purchase, when you have forgotten about your
customer and about the product. This is called products liability, and most homeowners policies will not
pay for it.
- Professional Liability. In some businesses, you are expected to provide a certain level of service, and
your client could suffer a financial loss if you do not perform the service properly. For example, if you are
an insurance agent and you do not add the right coverages to your client's policy, your client might hold
you responsible if his claim is denied due to your error. This is called professional liability (or "errors and
omissions"), and most homeowners policies will not pay for it.
As you can see, most homeowners policies provide only a very limited amount of coverage for a home-based
business. The list of things not covered is much longer than the list of things covered.
What Should You Do?
The best thing you can do is with down with your insurance agent and review your risks and your needs. There
are some good options for insuring a home-based business, but the best option for you depends on the size of
your business, the type of business, and the risks that you face in your business. The two of you can find the
right balance between more coverage and less money.
Your business is one of your biggest assets, so you need to protect it properly. More importantly, it is your dream.
If your policy cannot be adjusted to get the coverage you need, consider shopping for a different company. And if
your agent cannot answer your questions, consider shopping for a different agent. This type of consultation is the
agent's job. It is why you pay him! Don't you deserve to have your business properly protected?
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