Most homeowner insurance policies exclude business use of the home. If you receive money or other compensation for any activity in your home and file a claim related to that activity, your insurer might refuse to cover the claim. This potentially means two things to you:
- First, if a customer or client is injured on your property, you might have to pay the related costs or defend yourself in court if the customer sues you.
- Commercial activities can also result in your personal property and buildings not being covered under your homeowners policy.
You should review your home based activities carefully with your insurance representative to understand if a homeowners policy will cover them. Solutions are available. For example, some insurers will cover some types of business use for an additional premium, or agree to cover the business risk with a commercial insurance policy.
Some activities that insurers might treat as businesses:
- Making, repairing, or selling items
- Providing services, such as lessons, pet grooming, accounting or child care
- Renting storage space in your garage, barn, or other outbuilding
- Renting the apartment over your garage
- Acting as a distributor or holding parties for such name brands as Avon, Pampered Chef, etc.
- Home sharing rentals such as Airbnb or HomeAway
Some examples to consider:
- If you have a detached garage or workshop in a separate building where you make picnic tables for sale, or repair lawn mowers, or store your products, your homeowners policy will not cover the building because it is "used for business."
- If you rent out an apartment or storage space in a detached garage or other outbuilding, that building is "used for business" and is no longer a covered structure under your homeowners policy.
Your homeowners policy provides only limited coverage for business personal property. Examples include a piano for music lessons, a computer for business purposes, tools and supplies for making crafts or repairs, or inventory for sale or distribution.
Many homeowners policies now specifically exclude home sharing activities. However, some insurers will cover these activities in exchange for more premium. If you plan to or do rent out your home or part of your home in this manner, check with your insurance representative to make sure you have sufficient coverage.