With the pandemic, many have been forced to work from home to minimize exposure and slow the spread of the virus. Home offices have now become work headquarters and laptops or desk computers, printers, web cams, keyboards, headsets, iPads, and tablets are now essential tools to use when you show up to work every day—even if work is located at the kitchen table in slippers and PJs.
With the abrupt switch to home-based work, probably not much time, if any, has been given to the following thoughts:
- I wonder if I am covered by my homeowners’ policy for my business efforts if I am working from home?
- Does my homeowners policy cover office equipment?
- Am I still covered by my employer’s insurance policy for liability and business property if I work from home?
- What steps should be taken to ensure coverage at home?
If you have homeowners insurance, the first step in answering coverage questions is to read the policy to determine what is and is not covered. As with most topics in insurance, coverage answers depend on the insurance policy language. Potentially concerning for people working from home, is that homeowners policies usually have liability exclusions for bodily injury and property damage arising from business-related activities. Thus, generally speaking, a standard homeowners policy is not designed to cover home-based businesses or a situation of working from home.
The standard homeowners policy is designed to protect personal property while it is used for personal use. Any loss of personal items for personal use would be covered by a homeowners insurance policy for replacement cost minus the deductible amount. However, the minute personal property is used for business purposes and destroyed, there are limits in that situation on how much a homeowners policy will pay to replace the property. A standard homeowners policy typically has a $2,500.00 limit for “business personal property” that is damaged or lost while on the “residence premises.”1 The question then becomes, if there is a fire or burglary or other type of mishap on the “residence premises,” would $2,500.00 be enough to replace all the business items listed above? That is an easy answer—no.
Coverage for business equipment used at home may also depend on “how” or “who” bought the computer, printer, or desk. If an employer purchased the computer, printer, desk, or any business equipment for use at home by an employee and, for example, this equipment is destroyed by fire, it may be covered by the employer’s insurance like it would be covered if it was destroyed at the office. Again, however, it depends on the language in the employer’s commercial or business insurance policy.
Coverage for personal liability when an employee is working from home typically has limited coverage. For example, if clients are now coming to an employee’s home for business purposes, a homeowners policy will likely not cover a client or guest who slips and falls going down outside stairs—an accidental injury—or cover medical expenses therefrom. The homeowner will pay for that injury and those expenses. An employer’s business insurance policy in that situation will probably not pick up coverage either although some business policies do cover remote workers’ liability but with that coverage also comes the requirement that the remote-at-home employee is responsible to keep a safe working environment, which means, if the injury was caused by the homeowner’s failure to keep a safe working environment, then, of course, there would be no coverage. The International Risk Management Institute puts it this way:
Important: If you don’t update your homeowners insurance to reflect the fact that you’re using your home for business purposes, your insurer could deny a business-related claim that’s not explicitly covered by your existing policy. In many cases, courts will uphold business exclusions in your policy, and you could be left to pay for damages and liabilities out of pocket.2
So, having read your homeowners policy and realized more coverage for business-related claims is needed, how can coverage be added to a homeowners policy? One way is to go online to the Insurance Services Offices (ISO) website. This is an organization that develops standard insurance forms and has created endorsements that may be added to the existing homeowners policy to cover business property and liability when working from home either part time or full time.3 Look at these forms and familiarize yourself with them to decide if any of them pertain to your situation and then get with your insurance company or agent to choose a proper endorsement. There are several types to choose from.
One endorsement entitled a “Business Pursuits Endorsement” provides liability protection for occupations categorized as clerical, instructional, or sales. This option does not supply coverage for sole proprietorships or a business partnership. Another option is a “Home Business Insurance Coverage Endorsement” which provides coverage for business property, business income, personal liability, medical payments, and extra expense coverage for home-based businesses classified as office, service, sales, or crafts. Also, with this endorsement, businesses must meet eligibility criteria such as maximum annual revenue level and a cap on the number of employees. These latter terms can differ vastly with different insurance companies but this endorsement and those like it are popular endorsements for coverage for working from home.
A third option is an endorsement entitled a “Home-Based Business Endorsement” from the American Association of Insurance Services (“AAIS”) which is an organization like ISO that develops standard policy forms. This option includes three additional business classifications for coverage: retail, food, and bed and breakfast establishments.4 Adding an endorsement to a homeowners policy will cost extra in premiums but it is not an outrageous increase and generally, is less than $100 with some as little as $25.00.5
Finally, if none of the three types of home business endorsements are applicable, it is possible to obtain a Business Owners Policy (“BOP”). Typically, this type of policy is for small home businesses and provides business property and equipment and general liability coverage.6 These coverages tend to be on a much broader scale than one of the above three types of in-home business endorsements.
To summarize, if you are a full-time employee now working from home, you may be covered by your employer’s commercial business policy, but you will still need to verify from HR what protections are extended to remote employees. If the protections under your employer’s policy is limited, it may be time to read your policy or talk to your agent to learn what is and is not covered by your homeowners policy. If there is limited coverage for business purposes, it may be time to think about obtaining one of the four types of endorsements to add to your homeowners policy or purchase a whole new BOP. One of these options may provide the missing coverage you need.
1 See Insurance Information Institute, Insuring Your Home-Based Business, https://www.iii.org/article/insuring-your-home-based-business.
2 See International Risk Management Institute, Insuring the Home-Based Business (Part I), https://www.irmi.com/articles/expert-commentary/insuring-the-home-based-business-part-1/olson06.aspx.
3 See International Risk Management Institute, Insuring the Home-Based Business (Part 3), https://www.irmi.com/articles/expert-commentary/insuring-the-home-based-business-%28part-3%29.
5 Do You Need to Update Your Home Insurance If You’re Working From Home?, https://www.thebalance.com/does-home-insurance-cover-working-from-home-5092895