(Please also see Hobby or Business – Part One.)
Most individuals use their homeowner or residential insurance policy to handle their hobby activities as a collector or enthusiast. A homeowner (HO) policy usually includes a definition of “business” and some are so broad that nearly any activity qualifies as a business. In such instances, a hobbyist or enthusiast should consider whether separate business insurance is necessary.
Is Your Hobby a Business?
Let’s say you love photography and take pictures at events such as weddings to finance this passion. While you consider this to be a hobby, your insurer may define your activities as a business. If your camera equipment is stolen or damaged, there may be as little as $250 protection under your HO policy. HO coverage for business property differs depending on whether the property is located at or away from your residence.
Imagine being a photographer at a wedding. As you are snapping photos of the wedding party, a large boom stand with hot lighting equipment tips over injuring the maid of honor and the flower girl. If the injured women sue you since the injury is part of a business activity, your HO may exclude coverage.
When Your Job is Out of Your Home
There are numerous types of sales and service jobs. These include cosmetics, clothing, kitchen supplies, home decorator items, computer repair, web site design, photography, music lessons, auto repair and many contractors. Each job involves some type of business property that is excluded or severely limited under the HO policy. Therefore, each situation may need to be covered by business insurance.
Although independent consultants are in business, too often they think their HO policy will provide coverage because they don't have special equipment or leave their home office to run their business. Office furnishings such as laptops, PDAs, desks, chairs and file cabinets are subject to HO policy limitations. Without adjustments to the homeowner policy there may be little or no coverage for property used in a business.
Need More Insurance?
The legal form of the business may create a need for business insurance. If a limited liability company, corporation or partnership is formed, the related activity is a business and needs business coverage. Also, most HO policies will not provide coverage for employees or for any professional liability.
What can you do? First, determine if your activities qualify as a business. Then talk to Sutherland-Scherff to determine what coverage is provided by the policies you currently have and what options are available to fill-in any gaps in protection.
