Telecommuters and Potential Problems with the Home Insurance Policy

With today’s technology, it’s never been easier for workers to conduct their business from home. In a recent Sacramento Bee survey, over a third of all respondents said they would choose or stay at a job if telecommuting was an option. A great benefit of telecommuting is the potentially reduced cost of auto insurance. As you drive fewer miles each year, your auto insurance premium is reduced, along with maintenance and fuel expenses. However, one potential insurance wrinkle is your home insurance policy. Before you set up shop at home, you should give your policy a quick review to make sure you are not running afoul of its terms.

A standard exclusion in your home insurance policy is for anything arising out of a business. The policy defines business as a trade, profession, or occupation. Therefore, if you have a portion of your home dedicated to your telecommuting, it may be problematic in the event there is damage to the structure. The “other structures” portion of the home insurance policy specifies an exclusion for other structures used in whole or in part for business purposes. On the other hand, if you are simply using a room in your home to work on the computer, it’s likely to not be an issue for the insurer. Therefore, you should check with your insurer in your particular case if the space you use for your office is covered. If it’s not covered by the home insurance policy, check with your employer if their insurance can extend to the space.

When it comes to personal property, there is very limited coverage on your home insurance policy. The standard policy limits coverage to $1,000 for personal property used in your business. However, it excludes all computer equipment from the limit, as those items are not covered at all. Therefore, you should verify with your employer whose obligation it is to insure such items. It’s likely your employer will insure its property even when it is at your home. However, you should not simply assume this without checking any contract or agreement with your employer.

The same exclusion for business pursuits also applies to the personal liability coverage on your home insurance policy. If, as part of your job, you invite someone to your house for a meeting and they are injured, your home insurance policy would not cover the claim. This presents a degree of exposure to you that should be reviewed with your employer. As an employee, you should be covered under the commercial general liability policy when in the course and scope of your employment. Given the seriousness of potential liability claims, you will need to have verification of the coverage from your employer.

As a back up, many home insurance companies now offer the ability for you to include some incidental business exposures on your home insurance policy for some additional premium regardless of what state you live in – South Dakota, Wyoming, Virginia, South Carolina, West Virginia. There is an endorsement that can be added to the policy that modifies the business exclusion. You can determine the cost of such an endorsement and discuss this option with your employer.

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