Working from Home? Are You Covered?

Working from Home? Are You Covered?
The pandemic has led to a massive upswing in the number of people working from home, and many may continue to do so even after COVID-19 restrictions begin to lift. Some sources estimate that up to 30% of the workforce will continue to work from home multiple days per week by the end of 2021. But in the abrupt switch to home-based work, you may not have considered how the shift might affect your home insurance policy. If you’re one of the many people working from home more often, here’s what it could mean for your coverage.

Does Home Insurance Cover Working from Home?
Standard homeowners insurance isn’t designed to cover home-based businesses. The most common type of homeowners policy, known as an HO-3 or Special Form, only provides $2,500 of business equipment coverage for items inside the home and $500 for those off your premises, such as if you take your laptop to a cafe. Your business property coverage may extend to equipment in a detached garage or other separate structure. But the detached structure itself isn’t covered if you’re running your business out of it.

Potentially even more concerning is that homeowners policies usually have liability exclusions for bodily injury and property damage arising from business-related activities. One exception is if you’re under 21 and working for yourself in a part-time capacity with no employees.

Also, your home insurance policy doesn’t cover any bodily injury or property damage that arises from providing or failing to provide professional services from your home, like if a courier slips on your icy driveway while delivering a work-related package. These services are usually defined by courts as requiring specialized knowledge or mental skills, rather than manual skills, according to the International Risk Management Institute.

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 your policy’s business exclusions, and you could be left to pay for damages and liabilities out of pocket.

Home Insurance Coverage for Independent Contractors
If you’re self-employed and working out of your home—whether part time, full time, or only occasionally—you’re considered to be running a business from your residence. That means you’ll need proper insurance.

Most types of homeowners policies don’t include exceptions to this definition of a business. However, there’s a chance your HO-3 policy may have a limited number of exceptions with specific constraints, such as maximum compensation limits. It’s best to read your homeowners insurance agreement to check your policy’s terms and conditions. If you’re not sure whether you’re covered, reach out to your insurance agent to clarify your protections while working from home.3  

Home Insurance Coverage for Full-Time Employees
Suppose you’re a full-time employee working from home—a situation that has become more common since the beginning of the COVID-19 pandemic. In that case, it’s most likely your employer’s responsibility to use its business liability insurance to cover accidents, injuries, and other incidents that might happen on your property.

And if you get hurt while on the job, you’re still entitled to worker’s compensation benefits. Your employer may also be held liable if a customer visiting your home gets hurt or their property is damaged.

What if the business equipment you brought home, like a company laptop, is damaged or stolen? Typically, your employer is responsible for covering the loss using its business insurance. 

Even though your employer’s business insurance should shield you from liabilities, it’s still important to verify with HR what protections are extended to you while you’re working from home. It’s also a good idea to contact your home insurance company to check that you don’t need any additional coverage and that you aren’t violating any part of your policy agreement.

How to Add Coverage for Working From Home
If you need additional insurance to cover business-related claims, the Insurance Services Offices (ISO)—an organization that develops standard insurance forms—has created endorsements you may be able to add to your policy:
  • Increased limits on business property endorsement: Expands on-premises business property liability limit to up to $10,000.
  • Business pursuits endorsement: Provides liability protection for occupations categorized as clerical, instructional, or sales. But this option doesn’t apply if you’re a sole proprietor or even a business partner. 
  • Home business insurance coverage endorsement: Provides business property, business income, personal liability, medical payments, and extra expense coverage for home-based businesses classified as office, service, sales, or crafts. Businesses must also meet eligibility criteria such as maximum annual revenue and a cap on the number of employees.
Another option is a home-based business endorsement from the American Association of Insurance Services (AAIS), another organization that develops standard policy forms. The endorsement is similar to the ISO’s home business insurance coverage endorsement, but includes three additional business classifications: retail, food, and bed and breakfast.6
Home-based businesses that aren’t eligible for any of the above endorsements might be able to obtain a business owners policy (BOP). This policy is designed to provide eligible small businesses with property and general liability coverage. 

If you drive your car for business, it’s wise to check your auto insurance paperwork. Most personal auto insurance policies don’t cover business use, and your insurer may cancel your policy if you don’t let them know. You may have to add a policy endorsement or purchase a commercial policy if you plan to use your car for business deliveries or errands.

Does Renters Insurance Cover Working From Home?
Renters insurance is similar to homeowners insurance in scope, except that it doesn’t provide dwelling or structure coverage. Because it’s designed to protect your personal belongings and activities, it probably won’t cover any business-related claims. For example, if you use your computer to run a freelance business and someone steals it, your insurer could consider it business property and not completely cover the expense of replacing it. If you work from home and have renters insurance, read the fine print and check the details with your insurance provider.

Key Takeaways
  • Self-employed workers with home-based businesses may have little to no protection for business-related claims under their existing homeowners policy.
  • Full-time workers are probably covered for business-related claims by their company’s business insurance, but they can verify with HR what protections are extended to remote employees.
  • It’s best to check with your homeowners insurance company whether working from home would violate any of your policy’s terms—before you need to make a claim. 
  • A business owners policy or one of several homeowners insurance endorsements could provide the missing coverage you need. Contact your insurer to discuss which option is best for your needs.
Reprinted courtesy of; written by Lorraine Roberteby