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June 1995
In this issue
Insuring In-Home Business Pursuits
By Anita Robinson
More and more people are pursuing business ventures from their homes. Allied Group Research shows that approximately 15 million Americans work out of their homes. Many believe their Homeowners Policies adequately cover their in-home business pursuits. They do not. The unendorsed Homeowners Policy includes a $2,500 limitation on personal property used in any manner for any business purpose. It provides no coverage for Personal Liability or Medical Payments arising out of the business pursuits of the insured.
In-home business insurance is an industry in transition. One way to address the in-home business exposure is to endorse the Homeowners Policy to broaden the existing property coverage and to include some limited coverage for the liability exposures arising out of these business pursuits. Two riders are commonly used. The "Permitted Incidental Occupancies” endorsement removes the $2,500 limit that applies to business property on the premises and adds coverage for the customers of the business if they are injured while on the premises. The "Business Pursuits” endorsement provides coverage for the named insured wherever he or she is engaged in a business pursuit. This endorsement is intended to essentially cover sales, clerical and instructional occupations. The Business Pursuits Endorsement cannot be used if the insured is the owner or partner or has financial control of the business. These endorsements are geared toward small businesses. The endorsement does not offer coverage for liability arising out of professional services such as architectural, medical, or barber services. Bodily injury to a fellow employee of the insured that occurs in the course of employment is excluded.
Insurance companies have designed new policies to address the needs of the changing workplace. The new In- Home Business Policy effectively bridges the gap between the Homeowners Policy and conventional commercial business policies. The In-Home Business Policy meets the needs of today’s home-based entrepreneur by providing "Open Perils” coverage. This means it covers any loss not specifically excluded, restricted or limited by the policy form. This broad coverage extends to both business personal property and business liability and includes some fringe coverages associated with running a business. The cost of these new In-Home Business Policies is lower than the traditional commercial business policy and the coverage is much more comprehensive than the Homeowners Policy.
The program is open to sixty-two classes of businesses and is available in all states except Maine and Texas with premiums starting at $150 per year. Optional coverages include coverages for money and securities, increased limits for personal property off premises, loss of income coverage and electronic data processing coverage. Now the millions of Americans that work out of their homes can obtain the insurance coverages they need at an affordable price.
Know your Limitations—on Jewelry
By Lisa Sheffey
There is a $1,000 theft loss limitation on jewelry under all standard Homeowners policies. Under some circumstances, this limitation is increased to $2,500, but all losses are subject to a deductible.
You can also add an unscheduled property endorsement to your Homeowners policy that will provide a predetermined amount of coverage for jewelry. This is an alternative to scheduling each piece of jewelry that you want covered -- especially for those who may not want to pay the more expensive premium for scheduling their jewelry. However, the lower premium comes with exclusions and limitations. There will be maximum limits per item and per occurrence. Due to the concentrated values of individual pieces of jewelry, this method requires careful consideration.
The Personal Articles Floater is the best way to cover valuable personal possessions on a scheduled, open perils basis. As an endorsement, it is frequently made a part of the Homeowners Policy. There are three advantages to scheduling:
- No deductible clause applies to scheduled coverage.
- Increased limits are available.
- Covers perils not otherwise covered. For example if a prong loosened on a diamond ring causing the stone to be lost, this would be covered.
Even when jewelry is scheduled, it is a good idea to take appropriate steps to protect your property from loss and minimize loss adjustment problems. These basic risk management techniques include:
- Video Taping or Photographing Property -- A record of the jewelry items on video tape or photograph stored off premises can help you verify the ownership and condition in the event of a loss.
- Security Systems and Safes -- The precaution of installing vaults, security systems and alarms will minimize the exposure to theft losses.
- Safety Deposit Boxes -- Safety deposit boxes can be used to reduce the risk of loss. Premium credits may apply when they are utilized. It is a good idea to place jewelry that is not worn regularly in a safety deposit box.
- Appraisals -- In most cases it will be necessary to submit appraisals when coverage is written. It is also a good idea to have jewelry items re-appraised periodically.
Covering Property of Students Living Away from Home
All Homeowners policies provide $1,000 or 10% of the Personal Property (Coverage C) limit - whichever is greater - for personal property away from the primary premises. (See exhibit)
Theft coverage can only be provided if the student has not been away from the dorm for more than forty-five days. Therefore, if your college student comes home to your primary residence for weekends or extended vacations -- such as spring break -- theft coverage would still be provided. However, if the student leaves personal items in the dorm over summer vacation, theft coverage would not be provided after 45 days.
Coverage is not provided for any property of the college or university in the "care, custody or control” of the student. There is no coverage under the unendorsed Homeowners policy for electronic apparatus such as personal computers. Coverage for these items may be added to a Scheduled Personal Property Form with the approval of the insurance carrier.
Insuring Personal Injury under the Homeowners Policy
By Anita Robinson
Is Personal Injury covered under the Homeowners Policy? Typically, no. Many people confuse "Personal Injury” with "Personal Liability” that is included in the Homeowners Policy.
The Personal Liability coverage under a Homeowners Policy is liability that protects the insured against liability for both Bodily Injury and Property Damage.
"Bodily Injury” is defined as bodily harm, sickness, or disease, including required care, loss of services, and death that result.
"Property Damage” is defined as physical injury to, destruction of or loss of use of tangible property.
Homeowners liability coverage does not apply to what is termed "personal injury”-- injuries arising out of libel, slander, malicious prosecution, invasion of privacy, wrongful eviction or wrongful entry. These injuries do not involve the "bodily harm, sickness or disease” required in the policy’s definition of "bodily injury”.
Subject to the insurance company’s approval, the policy can be modified by attaching the Personal Injury Endorsement (HO 82). The Personal Injury Endorsement modifies the definition of "Bodily Injury” to include such injuries. However, the endorsement contains exclusions that make this coverage unavailable to individuals who are in the public eye -- such as political figures, entertainers and newscasters.
With today’s "sue syndrome”, this protection could be quite valuable. Adding this endorsement to your policy might be something you want to consider. The cost of this endorsement is minimal -- approximately $13.
Before you Leave the Shore
You are at the lake...it’s a beautiful day and the fish are biting, but here are some things you need to know...
The physical damage and liability coverage provided under the Homeowners Policy on watercraft is very limited:
Physical Damage coverage for watercraft, including trailers, furnishings, and equipment is limited to a maximum of $1,000.
Theft of watercraft, trailers, furnishings, equipment and outboard motors away from your residence is excluded.
Liability coverage is excluded for owned watercraft of any size powered by an inboard-outboard motor.
Rented watercraft with an inboard-outboard motor of more than fifty horsepower are excluded.
Sailing vessels of twenty-six feet or more in length, owned or rented, are excluded.
With this in mind, we hope you enjoy your recreational activities and that you will practice safety afloat. Make sure you know and practice the rules of courtesy and navigation. Check out the classes and the free inspections offered by the Coast Guard. Make sure you have the required floatation devices, fire extinguishers, visual distress signals, and navigational lights as well as practical equipment such as emergency repair tools, ropes and anchors.
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SOLUTIONS is a service of The McLaughlin Company and Creative Risk Management, Inc.—offering you timely and creative solutions to all your INSURANCE and RISK MANAGEMENT needs.
THE McLAUGHLIN COMPANY
CREATIVE RISK MANAGEMENT, INC.
1725 DeSales Street, NW
Washington DC 20036
Fax 202-857-8355 - 800-233-2258 - 202-293-5566
