Business insurance is an important tool you can use to transfer unacceptable risks to an insurance company. It should be considered as an important part of your Career Protection Plan.
- Loss of property like tools, supplies, and artwork from risks like fire, natural disasters, lightning strikes or theft (business personal property)
- Loss of a studio building you own.
- Loss of tools, display equipment, or artwork away from your studio, such as at an art show, doing an installation, or in transit.
- Liability incurred as a result of your art practice such as injury to others caused by an artwork, performance, display, teaching, or a slip and fall by a studio visitor.
Homeowner’s and renter’s insurance usually does not cover losses related to your art business.
Most homeowner’s insurance policies also exclude buildings that would normally be covered by homeowner’s insurance if they are used for business purposes. This would include a studio in a garage or separate building. You are operating a business if you offer goods or services for sale – even if you have never actually sold anything. Do you have a website promoting your work? That would probably be proof that you are in business.
Investigate business insurance options for studio contents, studio building, liability and consider disability insurance:
- An in-home business owner’s policy or rider on your homeowners’ insurance
- A separate business owner’s policy (you can do this even if your studio is in your home)
- Specialty insurance for performances, pop-up galleries, or other group activities.
Understand what your insurance does and does not cover.
- Read your policy, especially the exclusions! Ask questions!
- Special insurance is required for flood and earthquake. This is true for both business policies and homeowner’s insurance.
- If policy exclusions represent an unacceptable risk, ask about the cost for special coverage (called endorsements or riders).
Does homeowners insurance cover my art studio?
Many artists have studios in the home or in structures on the same property. Some start as a hobby and gradually grow into businesses, and many artists work in the home out of necessity or as the fulfillment of the dream to have a home and studio on the same property. If this describes you, there are some critical things you need to know:
- You’re in business if you offer goods or services for sale, even if that activity is only occasional
- Most homeowners (and renters) insurance excludes almost all property used in a business from coverage. (Most homeowners policies cover as much as $2,500 in business property in the home, intended to cover things like a computer, a desk and file cabinets in a home office)
- Most homeowners insurance excludes buildings used for business purposes from coverages (such as a detached garage or studio building), even when the same building would be covered if used for other purposes
- Most homeowners (and renters) insurance excludes liability coverage for injury or property losses arising from business activity
Why does homeowners and renters insurance exclude business activity?
- Except for valuation, and location, all homeowners (and renters) have very similar insurance needs. Policies were developed to suit the needs of most customers. Special needs, including home business, are often accommodated with additional cost endorsements (riders).
- Business insurance is a special class of insurance with many variations depending on each business’s needs, which are sometimes very complex. Because it is a specialized and often customized product, many companies that sell homeowners insurance do not write business insurance.
What are my options?
Start with your homeowners insurance agent. If your business insurance needs are simple you may be able to be able to purchase a low-cost home business endorsement (rider) on your homeowners policy, or change to a company that offers such a plan. However, there may be some downsides to this approach that you need to look for:
- Liability limitations-the amount of coverage for liability may not be as much as for a typical business liability policy. Also, the coverage may not extend beyond your home or cover product liability as would a typical business liability policy.
- Other exclusions and limitations: these typically include things like loss of income, property away from your business location, and other things that are available in business insurance plans.
A stand alone business insurance policy in addition to your homeowners coverage. In some cases, this could be with the same underwriter as your homeowners insurance, but most likely will be with another company that specializes in business coverage. Many of the best known names in the homeowners insurance market do not write business insurance.
What if my homeowners insurance agent says my studio is covered by my homeowners insurance?
Have the agent show you in your policy what your coverage is for business-related buildings, property, and liability. Read the policy, especially the exclusions and ask questions.
If you can get a digital version of your policy, search on the word “business.” That will help you locate any exclusions and coverage related to your art business.
If you have any doubt at all about your coverage, ask for a signed letter that states your coverage and keep a copy in a [simple_tooltip content=’A SOL is a place to store copies of your documents and records that is far enough away from your studio (50-100 miles) that it is unlikely to be affected by the same disaster.’]Safe Offsite Location (SOL)[/simple_tooltip] Unfortunately, not all homeowners insurance agents are knowledgeable about business coverage, and may be misinformed about their own products. A signed letter would give you leverage with the company, your state insurance commissioner, or a court if a claim is denied.
What else should I do to be sure I am covered?
Review your policy each year to be sure your home business endorsement has been included, or that the policy has not be changed in some way that would lower or exclude your business coverage. Ideally, your agent should inform you of changes, but often they do not. It is up to you to look out for yourself.
Be sure your agent understands the nature of your operation. You want to be sure you are covered, and if there is a problem, you need to know that BEFORE a loss occurs.