Freelance Insurance Basics: Does Insurance Cover Home Based Work?
What to ask your agent about your policy
Starting a freelance business often begins with doing small gigs in your spare time or making money off a hobby. When you’re not making a significant income from the activity, it may seem like you don’t need to do anything about insurance, but not telling your insurance company about business activity based at home could create problems if you file a claim.
People may think the cost of insurance for a home-based business is going to be high, but you may be able to get basic add-on coverage for just a few dollars more a month. If you are wondering whether your home insurance covers a home-based business, or when you need to tell your insurance company about freelance work, these are the basics to know, with some options to consider.
Does Home Insurance Cover Freelance Work?
Most basic homeowners or renter policies cover a minimum amount of business property at home. This coverage is very limited in most cases.
Also, renters or homeowners policies cover personal liability, but the keyword there is “personal.” Business liability is excluded from home insurance policies. The only way to know if a home insurance policy will cover you when you are doing part-time work from home or freelance work there, is to speak with a licensed insurance representative.
Home insurance will not cover loss of business income, lawsuits related to your work, or business-related injury.
When to Tell Your Insurer About Freelance Work at Home
Insurance is based on the concept of full disclosure. Let your insurance company know anytime you are working from home or running a side gig. In most cases, if you are doing a minimal amount of work or not making significant income from your freelance job or hobby, then your insurance company will likely take note of your declarations and may not have to adjust your policy at all. In some cases, your policy may have limitations, exclusions, or underwriting guidelines that require an endorsement, or amendment.
Options to Insure a Freelance Business at Home
Insurance companies provide different options to insure business activity or property. A few are outlined below.
- You can add an endorsement to your existing homeowners policy to increase limits on business property and equipment. According to the Insurance Information Institute, it can cost as little as $25 to increase limits from $2,500 to $5,000 for example.
- Endorsements to your homeowners liability can extend your liability coverage to include occasional business visitors (which would otherwise be excluded).
- Take advantage of in-home business package riders, or add-ons. The advantage of these is that they may include added coverage like lost income, additional operational costs in a claim (similar to additional living expenses), and, in some cases, may cover employees and/ or business-related lawsuits and injuries.
Let’s say the business is minimal and you have no business visitors coming to your home. Your home policy may not require any adjustment. Basic coverage for a minimal amount of business property (typically $2,500) is included in many standard policies. Be sure to check the special limits of insurance to be sure.
Another example is if you have stock, samples, or business equipment worth more than a few hundred dollars, or items in off-site locations. Your insurance company may be able to offer you an endorsement for them.
And if you have visitors like students, employees, or clients coming to your home, then you may need to get business insurance or add a business liability extension.
What If You Work From Home and Don’t Tell Your Insurer?
If you do not let your insurance company know about work from home, it might consider this an omission of information and deny a claim. Each policy has its own criteria for what is acceptable or not.
Information to Provide Your Insurer
The answers to the questions below may help you and your insurance representative know what the best kind of coverage is for your work activity from home.
- How much income do you make through your freelance, or gig, work?
- Do clients visit the home? If so, how often? Once a week, or maybe once a month?
- Are there any signs posted outside the home?
- Is it a registered business? Is the home itself registered under a business name, or are there directory listings for the business at the home address?
- For tax purposes, is part of the home listed for business use? Are there dedicated areas of the home for the business such as a photography studio, music room, garage, or office?
- What is the value of equipment used for business? Is the equipment kept at home but used off-site?
- What is the value of any stock for sale or samples kept at home?
- How often are business activities done in the home?
- Are there any employees who will work in the home?
- Are there any explosives or combustible materials, and if so, for what purpose? Work that might warrant these kinds of materials would be woodworking, artists, or people who are doing automotive work.
Answers to questions like these give underwriters the information necessary to understand what the risks are and whether you need a business package or not.
Discuss your options with your insurer and keep them up to date if the business grows or changes.
Other Useful Insurance Options for Freelancers
These insurance products could be useful for freelancers working from home. Ask your agent about them to learn more.
- General Liability Insurance
- Professional Liability Insurance
- Business Owner Insurance
- Errors & Omissions Insurance
- Cyber Risk Insurance
- Health Insurance for Freelancers
The Bottom Line
If you are running a very small operation, or side hustle with no employees, you might not think you need special freelance insurance. But home insurance policies are structured to cover people who use their residence for personal use and not regular business use. Any time you are working from home, it is important to tell your insurance company about it to make sure you will not have a claim denied.
Also, look into standalone, in-home business packages, as well as relevant add-on options. And because different companies offer various levels of coverage for freelance and home-based workers, don’t forget to shop around to compare prices and coverage. Sometimes it is worth changing insurance companies to get the best deal.
Insurance Information Institute. "Insuring Your Home-based Business." Accessed Dec. 20, 2019.
State Farm. "Options to Consider When Insuring Your Small Home Business." Accessed Dec. 20, 2019.
Insurance Information Institute. "Insuring Your Home-Based Business: What You Need to Know if You Work From Home." Accessed Dec. 20, 2019.