We’ve all had that friend, neighbor or coworker that invites us to attend a candle, makeup, kitchen gadget or handbag party. You can buy products, or book a party of your own to receive a discount. You can even sign up to become a consultant and make some extra cash of your own! Sounds like a great deal, right? But, is your home-based business covered?
Intrigued by the opportunity to make some extra cash in your spare time, you sign up to be a consultant with “XYZ Co” and are now fully stocked with a kit of sample products, catalogues, and order forms. You are ready to start booking parties with anyone and everyone you know. Your kids and husband are climbing over the stacks of your party materials all around the house. Everything is set, and you’re ready to load up for the first big party. This is gonna be awesome!
By signing up as a consultant and getting that marvelous sample kit, you have now started a business operation out of your home. All of the boxes of product that get delivered to you for client distribution are now legally defined as business inventory. But, is your home-based business covered? You have no, none, zero, zilch coverage for this! All homeowners policies have exclusions embedded in them (typically found way in the back of that thick stack of papers, amongst all of the legal jargon that most of us don’t understand). In that wonderfully worded list of exclusions, there is an exclusion for business operations and inventory. Business operations don’t only apply to people who have a business license or storefront.
If you are holding a party and someone gets injured by the product you are demonstrating, you are liable for his or her injuries. If you are lighting up that fragrant smelling candle, but accidentally start a fire, you’re liable for the property damage. If you’ve just received a shipment of $5,000 worth of product, and someone steals it from your garage, you are liable for the product replacement. It sounds scary: all of these exposures and no coverage from your homeowners insurance.
Does Homeowners Insurance Cover It?
Luckily, there is an answer – you can get coverage for all of your liability exposures and your product/inventory! Some insurance companies will allow you to add an endorsement to your homeowners policy to include your business property for a limited (and usually very small) limit. Other companies do not offer any coverage to be added to your homeowners policy and instead will offer you a business owners policy. A business owners policy is typically inexpensive and provides the liability and inventory coverage needed to protect you against out of pocket expenses and/or lawsuits.
To make sure you are prepared, call 360-414-8754 to speak with us about your coverage today.