Starting to work from home: insurance gaps to check

Working from home comes in several kinds, and the insurance question is different for each. An employee whose laptop moved from an office to a spare bedroom has one small gap. A freelancer who bills clients from the same bedroom has a larger one. A person who sells goods from the garage, sees clients in the front room, or employs someone has an exposure the home policy was never written to hold. All of them are told, correctly, that a home policy is not a business policy, but the practical question is which parts of the work fall outside it and what the least expensive adequate fix is.

This guide sorts the gaps by mechanism: the property you use for work, the liability the work creates, the income the work produces, the car it puts on the road and the data it stores. For each, it says what the standard homeowner or renters form does, what it stops doing when the activity becomes a business, and the endorsement or policy that closes the difference. The right answer for a remote employee is often nothing beyond a phone call; the right answer for a growing home business is a small commercial policy.

First, decide which kind of home worker you are

The forms draw a line at business, which they define broadly as a trade, profession or occupation carried on for money, with a small allowance for activities below a modest annual income threshold. That threshold, and the exact wording, vary by carrier, so the categories below are a way to think rather than a legal test.

• Remote employee: paid a salary by an employer elsewhere, using the employer's equipment. The employer's policies cover most of the risk; the home policy needs to know.
• Self-employed professional without visitors: consulting, writing, design, bookkeeping, software. Liability exposure is mostly professional; property exposure is the equipment.
• Self-employed with clients on the premises: tutoring, therapy, beauty services, fitness, music lessons. Premises liability becomes the main gap.
• Product business: goods stored, made or shipped from home. Inventory and product liability are the gaps, and the quantities decide the policy.
• Home business with employees: anyone paid to work at the house, including a part-time assistant. Workers' compensation enters the picture, and the home policy stops being the right vehicle.

Property: equipment, inventory and the employer's laptop

A homeowner or renters policy covers personal property. Property used primarily for business is covered only up to a small sublimit on the premises and a smaller one away from home, and some forms exclude business data and samples entirely. A remote employee's company laptop is usually the employer's property, insured by the employer, but it is worth confirming in writing who pays if it is stolen from the house or dropped, because some employers deduct the loss from the employee.

A self-employed worker's computers, cameras, tools and furniture are business property, and after a fire the carrier will apply the sublimit to them. Two fixes exist. A business property endorsement on the home policy raises the sublimit, often to a figure adequate for a desk-based business, and is inexpensive. A separate business owner's policy or an inland marine floater covers equipment at higher limits, away from the premises and while in a vehicle, which matters for a photographer, a mobile technician or anyone who carries the tools to the client.

Inventory is the item people miss. Goods held for sale are business property, and a garage holding stock for an online shop can exceed the sublimit many times over. Product businesses need the inventory insured at cost, with an eye on the peak season figure rather than a quiet month, and need to check whether the stock is covered in transit and at a fulfilment location. An open-peril home policy also excludes some causes of loss that matter to stock, such as temperature change, which a commercial policy can be endorsed to cover.

Liability: the client on the stairs and the advice that went wrong

The liability section of a home policy excludes bodily injury and property damage arising out of business activities. A client who slips on the front step on the way to a consultation, a student injured during a lesson, a delivery driver hurt collecting a shipment of your products: each is a business visitor, and the home policy's liability coverage will not respond. This is the gap that turns a small home business into a large personal loss, because the injured person's claim is aimed at the household's assets and the defence costs are yours.

A home business endorsement on the homeowner or renters policy adds premises liability for a low-traffic business, typically with conditions on the number of visitors, the presence of employees and the type of activity. Above those conditions, a business owner's policy provides general liability with real limits, adds business property and business income, and costs modestly for a low-hazard home operation. Product businesses also need product liability, which the home endorsement usually excludes, and which the business owner's policy includes for many classes of goods.

Advice, design and professional work carry a separate exposure that neither the home policy nor general liability covers: the client who says the work was wrong and cost them money. That is professional liability, sometimes called errors and omissions, and it is bought on its own. A consultant with a home office and no visitors may need only that policy and a business property endorsement; the general liability part of their exposure is genuinely small.

Income, the car and the data

When a fire closes the house, the home policy pays additional living expenses so the household can live elsewhere. It pays nothing for the income the business loses while the office is uninhabitable. Business income coverage, part of a business owner's policy, replaces that income for the period it takes to get running again, and for a sole proprietor the household budget depends on it more than on the equipment.

A personal auto policy covers driving to a client's office, running errands and, in most forms, a car used occasionally for business by its owner. It does not cover delivering goods for pay, carrying paying passengers, or a vehicle used primarily for the business, and a home-based product business that makes daily delivery runs has crossed that line. A business-use rating on the personal policy handles the middle ground; a commercial auto policy handles a vehicle that is genuinely a work vehicle. In Utah, personal injury protection follows the personal policy, but the business-use exclusion sits above it.

A home business that stores client names, payment details or health information on a home network has a cyber exposure that the home policy does not touch and the business owner's policy touches lightly. A standalone cyber policy pays for notification, restoration and third-party claims after a breach, and its underwriting questionnaire is a useful checklist of the security steps a home office should take regardless.

Employees, permits and the landlord

The first paid helper changes the picture, and the change is not optional. Each of the four states operates a workers' compensation system that reaches employers with even a small number of workers, and the exemptions for household or casual labour are narrow; a home business that pays an assistant should treat workers' compensation as a required policy and confirm the exemption thresholds with the state agency rather than assume one applies. A workers' compensation policy for a low-hazard office role is inexpensive, and it removes the household's exposure to an injured worker's medical bills and lost wages.

Renters and condo owners have an extra step. A lease or an association's covenants usually restrict business use, and a landlord's or association's own policy will not cover damage or injury arising from a tenant's business. Disclosing the home business to the landlord and the carrier at the same time keeps the renters policy valid and avoids a lease breach being discovered by an adjuster. Home occupation permits, where a city requires them for client visits or signage, are a similar disclosure: not an insurance document, but something an adjuster will ask about after a business-related claim.

A worked example

Suppose a graphic designer leaves an agency job and starts freelancing from a spare bedroom in Reno, with $12,000 of computers and monitors, two clients a month who visit to review proofs, and no employees. Her renters policy caps business property at $2,500 on premises and excludes business visitors from liability. A home business endorsement raises the equipment coverage to $15,000 and adds liability for the visiting clients for around $150 a year in this example. She also buys a professional liability policy with a $500,000 limit for the risk that a client blames a printing error on her file, because the endorsement does not cover advice or work product. When she hires a part-time assistant a year later, the endorsement's conditions are exceeded; she moves to a business owner's policy with business income, and adds workers' compensation for the assistant. The figures are hypothetical, and the sequence, endorsement first and commercial policy at the first hire, is typical.

How to use this

Tell us which of the five kinds of home worker you are, what equipment and stock are in the house, whether anyone visits or works for you, and whether you drive for the business. We check the existing home or renters policy for the business exclusions that apply, price the endorsement against a business owner's policy across the carriers we represent in Arizona, Nevada, Utah and Idaho, and add professional liability, workers' compensation or cyber coverage only where the activity calls for it. For a remote employee with the employer's laptop, the usual finding is that a note on the file is all that is needed.