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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

insurancegen-99Why 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. Needs an Expert 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.

miniicons5-97 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 Safe Offsite Location (SOL). 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. Long Term Project
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. miniicons5-98
  • 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.
  • If you are going to build an addition to your house or a separate studio, find out the insurance implications before you build. You may want to adjust your plans to save money on your insurance. Financial Investment
  • Be sure you understand the exclusions. For example most homeowners, renters, and business insurance policies exclude flood and earthquakes. You can purchase special coverage for those risks. Financial Investment
  • Cultivate a relationship with your agent or broker. Ask questions! Needs an Expert