Does My Home Insurance Cover My Home Business?

There are an ever-growing number of North Carolinians who have chosen to run businesses from their homes, whether this involves selling products around the community, working online or bringing work that's more conventionally done in an office setting into the home environment. While home-based businesses have proven to be a good source of extra income for those living here in the Greensboro area, all of those profits and more could conceivably be lost in the blink of an eye if some type of unfortunate incident were to occur and that home business was not previously covered by proper insurance protection.

Home Insurance Policy Coverage

In Greensboro home insurance agencies are fairly plentiful but only a select few have made it their mission to highly educate their policyholders as to exactly what their insurance does and does not cover. Homeowners insurance is typically built around three benefit areas:

• Protection against covered losses suffered to your home and other structures on your property
• Protection against covered losses suffered to your personal property and other contents located within your covered home structure(s)
• Protection against losses from liability charges, including both legal costs and judgments

What is unclear, however, without reading the terms of your specific homeowners (HO) policy, is what loss protection is afforded to your home-based business. This is because every homeowners policy can be unique in its particular coverage. Typically, however, it can be safely said that standard homeowners insurance will likely leave gaps in protection as it applies to your business, leaving you exposed in the event of losses in both business property and liability risks.

Additionally, even if you do have some coverage in these areas from your standard homeowners policy, this coverage is typically quite limited in the amount of coverage offered. Most standard HO policies limit losses on business property (on premises) to no more than $2500 and losses for business property off premises to $500. You can see that if a fire occurred in your home office and you lost your computer, copy machine, fax machine, office furniture, smart phone and more that your losses could easily exceed $2500.

Three Easy Fixes

There are three potential solutions to your home-based business insurance needs and you should consult your insurance agent to see which best suits your particular business:

1. An endorsement to your current homeowners policy
2. A separate in-home business policy
3. A dedicated business owners policy (BOP)

Do I Need Homeowners Insurance For A Townhouse?

Homeowners insurance is as important to someone living in a townhouse as it is to any other homeowner and, if you have a mortgage, your mortgage lender will require that you maintain a policy to cover their financial exposure. If you fail to maintain the proper level of homeowners insurance on your dwelling the company holding your mortgage is within their rights to mitigate the risk of losing their financial investment by taking out insurance for you and having you charged for it.

There are several negatives to this process, called force-placed insurance, including:

• The coverage with force-placed insurance will have fewer benefits than regular homeowners insurance and may not pay any benefits to you for loss of your personal property. It may only cover the dwelling itself, protecting only your mortgage lender's interests.
• Force-placed insurance will usually cost more than the homeowners insurance you could buy for yourself. Plus, your mortgage lender's transfer of the cost will increase your monthly mortgage payment.
• By letting your insurance lapse you will have created a black mark on your insurance history, labeling you as an undesirable insurance risk for any future insurance you try to obtain. This will make your future insurance purchases more expensive because of your higher risk.

A Townhouse is a House

Even though your townhouse may be located in a community where the homeowner's association (HOA) maintains a master policy that may cover common areas such as the swimming pool and the recreation center, that policy wouldn't pay for your loss if, say, you had a fire that destroyed your property. Homeowners insurance is meant to pay for losses suffered as a result of any covered peril such as fire, burglary, windstorm and vandalism, to name a few. It covers not only the structure itself but also the appliances, electronics, clothing, jewelry, artwork and other personal possessions found within the structure. It also adds liability coverage in the event that someone visiting you gets injured and sues you in court or incurs medical expenses.

It should be noted that, just as in any homeowners insurance policy, there may be clearly defined limitations on the amount that will be paid on claims for the loss of expensive items such as furs, jewelry, artwork and other high-priced collections such as coins or stamps. These items may be covered fully, but it would require a special endorsement.

Does Renters Insurance Cover Power Surges?

While it's estimated that, in North Carolina, 95% of homeowners carry homeowners insurance, only about 40% of renters have renters insurance. Those who do carry renters insurance have taken an important step toward helping guard their financial futures, and not only for the replacement cost of their personal property in the event of a fire or a burglary but also in case someone gets injured at their place and they're held liable.

Understanding Your Renters Insurance Coverage

Renters insurance is extremely affordable compared to homeowners coverage, at a comparative cost of only about 15%. According to Insurance Information Institute data from 2013, North Carolina has some of the most reasonable renters insurance rates in the country, running about $146/year at that time, one of the cheapest in the country. The reason renters insurance is so much less expensive than homeowners coverage is because the property it protects is strictly personal. If structural damage or loss is suffered in your rental home, it's the landlord's insurance policy that covers the claim.

Coverage For Power Surges

Power surges occur when the electricity going to your home is suddenly interrupted, even for just a few seconds, and then suddenly comes back on again. Electronic equipment and electrical appliances are designed to run at a certain voltage, usually 120 volts. Voltage, however, is not constant, but runs within a range between zero volts and 169 volts (peak power). When the power is disrupted and then suddenly comes back on it can send a power surge down the electric lines far in excess of the maximum 169 volts your electrical equipment is designed to handle. This spike can be fatal to your electronics, causing an arc that can overheat electrical components. Even small surges can eventually play havoc with your television, computers and stereo system, which is why experts recommend hooking this equipment up to surge protectors.

Your insurance company expects you to protect your electrical devices from harm by unplugging them in the event of a power outage and not plugging them in until power has been restored. Power surges that damage your equipment will typically not be covered by your insurance unless they result from a peril covered by your policy such as a fire or a windstorm. You may, however, be able to get an endorsement to your policy that will specifically cover any power surge. Speak to your agent for guidance.