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Is Home Business Liability Covered by Your Insurance?

written by: Cherise Kelley•edited by: John Garger•updated: 6/28/2011

If your home business harms a customer or costs them money, will your insurance step in for you and pay for the other person's damage or injury? Learn whether your insurance covers your home business liability.

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    Liability is the responsibility to pay for someone else's damage or injury. Everyday causes of personal liability are owning a home and owning a dog. If something in your home is broken, this can cause someone to injure themselves. If you could have foreseen this risk and repaired your home, then you could be found liable for their injury. Insurance claims are paid every day for injuries caused by loose floor boards, slippery floors, and ladders that are not secured properly. The strictest law for dog bites is in California. Here, if your dog bites someone, then you are liable, no matter why it happened. Here, you are made to pay the victim's medical bills, pain and suffering, with no exceptions. Other states and countries hold home owners and dog owners less liable, by varying degrees.

    Personal vs Business Liability:

    Home based business owners sometimes confuse their personal and business liability. To help you tell the difference, here are some home business liability situations: A repair tech spills coffee into a customer's laptop. A paid tutor tells his pupil the wrong answers on a practice SAT exam. A customer's toddler leaves a day care provider's home and goes into the street. A paid comedian tells some jokes that cause customers to avoid a certain restaurant. A house painter gets paint on a customer's car. Business liability is risk that you wouldn't have if it weren't for your business. You can be liable for damage and injury while out on business calls, too, not just at your home.

    How you can tell if coverage is excluded:

    The insurance industry believes that each insurance policy should cover specific risks. For this reason, your home and your car each need their own policy. They each exclude coverage for the other. Similarly, most homeowner's insurance policies exclude business liability. (Most do cover personal liability.) Read your policy carefully to see if business risks are excluded. If you don't feel able to do this, then call your insurer's claims phone line. You can find it on your bill. It may be easier for you to call your agent, but agents don't handle insurance claims. Agents themselves often call the claims line to verify questions of coverage. Ask to speak with a liability adjuster.

    What you can do if coverage is excluded:

    You have some insurance options if coverage is excluded. You can get a business insurance policy. In addition to liability, these insure your business equipment including computers, your inventory, and your risk of not getting income if you have a loss. You can get a liability only insurance policy. You can decide to absorb your home business risks by having a savings account for paying customers' losses. You can incorporate your home business to protect your personal assets. If you work at home as someone else's employee, then their business insurance might cover you. Check with them.