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DISPELLING HOME-BASED
BUSINESS MYTHS,
MISCONCEPTIONS
MAY/JUNE 2008
Estimates vary over how many households have a home-based business. Some studies put
the figure as high as 11 million or three out of 10 households. In a study completed by
IIABA, the estimate is more than half of those home-based business owners are
underinsured and nearly 40 percent of those surveyed are uninsured primarily because they
think their homeowners policy covers their business.
There are many myths or misconceptions about insurance coverage when it comes to a
home-based business. Dispelling those myths gives your agency an opportunity to build
customer loyalty, improve retention and sell a policy.
Myth: It’s not really a business. I just do a little bit on the side. I don’t earn much money.
Another variation is—I only do a few (choose one) Web site, craft fair, home parties, etc. It’s
just a hobby.
Truth: Most policies state if you make more than $2,000 a year, it’s a business.
Myth: My homeowners policy will cover a lawsuit or any loss to equipment or inventory.
Truth: A homeowners policy was never intended to cover business exposures.
Consequently, coverage for the items used in a home business such as computers, filing
cabinets, tools and inventory are commonly limited by low loss limits or excluded all together.
Most unendorsed homeowners policies provide no liability insurance for a home-based
business. Never rely exclusively on an unendorsed homeowners policy.
Myth: I have a business endorsement on my homeowners. I’m all set for business coverage.
Truth: An endorsement is seldom as much coverage as a BOP. Most likely, there are still
exclusions for off-premises theft and liability. This is especially important to a business that
relies on home parties, craft fairs or other off-premise venues. In addition, business property
coverage may have a cap that is still too low for the situation.
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Myth: I don’t have any business property. I don’t need coverage.
Truth: Household items that are also used in business, such as computers or tools, may be
excluded at the time of a loss as business use. And, many insureds don’t think they have
much inventory at home. But, when they calculate the value, it may add up to more than
they expect.
Myth: My clients never come to the house. Liability is not an issue.
Truth: What happens if a delivery person slips on the front porch and injures his back while
delivering a business-related package? It could well be that there is no coverage for a suit
associated with business deliveries. The insured may do some business off premises with
demonstrations, meetings or shows creating an off-premises exposure. Most homeowners
and business endorsements exclude off-premises liability.
The solution in every one of the above scenarios is a @Home Business Owners Policy. RLI
offers a policy that is designed specifically for at-home businesses. These policies provide
true BOP coverage such as business liability and replacement of lost income, and off-premises
theft liability. It eliminates gaps in coverage at very affordable rates (starting at $145).
More than 100 classes of businesses are eligible, including: crafters, accountants,
photographers, database managers, home sales, Web site designers, interior decorators and
many computer consultants.
Want to know more about offering @Home Business coverage to your customers? E-mail Deb
Reitz, call (800) 962-7950, ext. 225 or go to RLI @ Home Business at iiabny.org.
Dispelling Home-Based Business Myths, Misconceptions
IIABA-RLI program provides “true” business owners coverage for homeowners who
mistakenly believe they don’t need it.
© 2008 www.tricountyagents.com