If you work from home, think about insurance

Friday, October 21, 2005

YOUR BUSINESS: Scott Simmonds

By some estimates there are more than 50 million home-based businesses in the United States, and Maine certainly has more than its share.

There are telecommuters, salespeople, direct marketers and even consultants who work out of their homes. No matter whether your home-based business is full time or part time, there are some insurance issues to consider.

There are two broad categories of insurance coverage in all homeowner's insurance policies.

Property insurance covers your stuff - the house, your furniture, clothing, etc. Liability coverage protects you against a lawsuit if someone is hurt or if you are responsible for damage to someone's property.

In general, personal insurance policies are just not designed to do the job for a business.

Many homeowner policies provide only $2,500 of business personal property coverage at your house and $250 away from your premises. That will barely cover your desk, file cabinet and computer.

If you are using a garage that's separate from your house for storage or any other business operation, you may be subject to a broad policy exclusion that excludes all coverage for that building.

Your home insurance provides no coverage for business interruption - payment for the lost profits and continuing expenses during the time it takes you to rebuild your business after a fire, windstorm or other insured loss.

Business liability incidents are also excluded by most home policies. A client visiting your home or an injury you cause would not be covered. There is no product liability insurance in a homeowner's policy. Personal umbrella insurance offers no business coverage either.

The solution lies in a conversation with your insurance agent. Some insurers offer a rider that can be added to your home insurance policy. You may need to purchase a separate business insurance policy. Consider using the same insurance company for both your personal and business liability coverage to avoid problems at the time of a claim.

If you are a telecommuter or use a home office in addition to a business location, make sure your home is a part of the liability insurance purchased by your employer. Another question to ask is, will your employer's property insurer pay for damage to property you own that's used in the business?

Many home business owners are adequately covered by a personal auto policy.

Using the family car to run to the office supply store isn't a coverage problem for most insurance companies. If you make deliveries or use a pickup or van, you may need to buy a commercial auto policy. Talk with your insurance agent if you make deliveries, carry people for a fee or if your business use of the vehicle is more than 20 percent of your total milage.

Buy the offered coverage when renting a car from Hertz, Avis or other short-term rental companies. Their contracts make claims a nightmare and include obligations not normally covered by standard auto insurance.

One option may be using a credit card that provides collision damage waiver coverage as a cardholder benefit. Call the toll-free customer service phone number on the back of your card to check.

Maine requires workers' compensation coverage if you have any employees - even part-time workers. You also may be able to buy workers' compensation on yourself as a way to have some protection if you can't find health or disability insurance. Talk with your agent.

If you're a consultant, architect, real estate agent or other professional giving advice, consider coverage for claims against you for errors or omissions. Professional liability also is known as malpractice insurance. It protects you from suits alleging your advice cost your customer or client money.

Find an agent you feel is interested in your business. Get recommendations from your peers and friends. Select your insurance adviser in the same way you would choose an attorney or accountant. Use one agent for all your business and personal insurance. Meet at least once a year to discuss your needs.

Scott Simmonds is president of Insurance Consultants of Maine Inc., a fee-only provider of insurance advice and counsel. He can be reached at 284-0085 or by e-mail at scott@icofmaine.com. His Web site is www.endwimpyinsurance.com.

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