Does Home Insurance Cover Working From Home?
To avoid unpleasant surprises, double-check your coverage. Working from home, whether full-time or as part of a hybrid model, is becoming more common. However, you may not have considered how the shift to home-based work might affect your home insurance policy.
Here's what it means for your coverage if you're one of the many people who work from home.
Does Home Insurance Cover Working from Home?
Homeowners insurance is not intended to cover home-based businesses. The most common type of homeowners policy, known as a HO-3 or Special Form, only covers $2,500 in business equipment for items inside the home and $500 for items outside the home, such as if you take your laptop to a cafe. Equipment in a detached garage or other separate structure may be covered under your business property coverage. However, if you run your business from the detached structure, you are not covered.
Even more concerning for people working from home is that most homeowners policies exclude liability for bodily injury and property damage caused by business-related activities. One exception is if you are under the age of 21 and working for yourself part-time with no employees.
Furthermore, your home insurance policy does not cover bodily injury or property damage caused by providing or failing to provide professional services from your home, such as if a courier slips on your icy driveway while delivering a work-related package. According to the International Risk Management Institute, courts typically define these services as requiring specialized knowledge or mental skills rather than manual skills.
Home Insurance Coverage for Independent Contractors
If you are self-employed and work from home, whether part-time, full-time, or only occasionally, you are considered to be operating a business from your home. That means you'll need adequate coverage.
The majority of homeowner policies make no exceptions to this definition of a business. Your HO-3 policy may, however, have a limited number of exceptions with specific constraints, such as maximum compensation limits. It is best to read your homeowners insurance agreement to ensure that you understand the terms and conditions of your policy. If you're unsure whether you're covered, contact your insurance agent to discuss your options for working from home.
Home Insurance Coverage for Full-Time Employees
Assume you are a full-time employee who works from home. In that case, it is most likely your employer's responsibility to use their commercial liability insurance to cover accidents, injuries, and other incidents that may occur on your property. In addition, if you are injured on the job, you are still entitled to worker's compensation benefits. Your employer may also be held liable if a customer who comes to your house is injured or their property is damaged.
What if the business equipment you brought home is damaged or stolen, such as a company laptop? Typically, your employer is obligated to cover the loss through their business insurance.
Even though your employer's business insurance should protect you from liabilities, it's still a good idea to check with HR to see what protections are available to you while working from home. It's also a good idea to contact your home insurance company to ensure that you don't need any additional coverage and that you aren't breaking any of the terms of your policy.
How To Add Coverage for Working From Home
If you require additional insurance to cover business-related claims, the ISO—an organization that creates standard insurance forms—has created endorsements that you may be able to add to your policy:
- Increased business property endorsement limits: Increases the on-premises business property liability limit to $10,000.
- Business pursuits endorsement: Provides liability protection for clerical, instructional, or sales occupations. However, if you are a sole proprietor or even a business partner, this option is not available to you.
- Home business insurance coverage endorsement: Provides coverage for business property, income, personal liability, medical payments, and extra expenses for home-based businesses classified as office, service, sales, or crafts. Businesses must also meet eligibility criteria such as a maximum annual revenue and an employee cap.
A home-based business endorsement from the American Association of Insurance Services (AAIS), another organization that develops standard policy forms, is another option. The ISO's home business insurance coverage endorsement is similar, but it includes three additional business classifications: retail, food, and bed and breakfast.
Home-based businesses that do not qualify for any of the aforementioned endorsements may be able to obtain a business owners policy (BOP). This policy is intended to provide property and general liability coverage to eligible small businesses.
Does Renters Insurance Cover Working From Home?
Renters insurance is similar to homeowners insurance in scope, with the exception that it does not cover the dwelling or structure. It is unlikely to cover any business-related claims because it is intended to protect your personal belongings and activities. For example, if you use your computer to run a freelance business and it is stolen, your insurer may regard it as business property and refuse to fully cover the cost of replacing it. Read the fine print and confirm the details with your insurance provider if you work from home and have renter's insurance.