By Charles T. Wilson, CMC, CRM, RPLU
As an insurance customer, there’s lots of confusion about the differences between personal and business risks and the insurance claims that can bite you.
· “I just sell and train for Amway – I don’t take payments directly so I don’t need extra coverage….”
· “My broker says my umbrella covers anything that could go wrong….”
· “I really don’t have any business property or equipment in my home office – I use it for personal too….”
Confusion arises from the question “What’s business?” and the different insurance company definitions and exclusions don’t help.
Is owning several rental properties a “business?” What about “sales” from home? Different insurers define these in different ways. Some allow 2 to 3 residential rentals or minor “envelope-stuffing” type businesses to be included on the home insurance policy (with certain restrictions). Others do not.
Other business-personal gaps or overlaps can be just as tricky: inviting clients to your home for dinner; serving on a charity’s board of directors; using your personal auto for a business errand, or worse, asking a neighbor to pick up some party supplies for a business-sponsored fund-raiser. Can you feel the quicksand? For brokers it could mean an E&O claim.
Risk management starts with you – as a buyer of insurance – being alert to the possible confusions and getting the proper advice.
· First, get a “real” insurance broker, put as many of your policies as possible with them, and insist on annual sit-down updates.
· Be transparent with your broker about all your personal and business activities. Ask questions and take notes to keep with your policies.
· Watch out for “creeping” exposures:
oOne more rental unit, or increased revenue from your “small” home-based business or hobby could disqualify you from “personal” coverage;
oRemodeling or new equipment that adds value to your home office probably needs a higher limit;
oIn-home assistance for an ailing parent or new child could require workers’ compensation coverage.
· Make sure you have a broad home policy that covers personal-type exposures – like a dinner party for business clients. Understand the full ramifications of the “Business Exclusion.”
· Get specific business coverage for most business exposures: property, liability and auto for starters.
· Make sure your charity Board has both Directors & Officers and Employment Practices Liability coverages. These are not covered by your Homeowners policy.
Questions or concerns? Please call for a more focused, no-obligation discussion.
Charles T. Wilson is a Certified Management Consultant (CMC®), confidential advisor, speaker and Principal of RiskSmart Solutions®. He is a specialist in insurance and risk management and does NOT sell insurance. Clients save time and money with objective advice on getting the right broker and service, the best coverage and price, with the least amount of risk. charles@risksmartsolutions.com | 510-685-3883 | www.risksmartsolutions.com © 2000-2012 RiskSmart Solutions®. Download PDF copy here: http://bit.ly/z8rGc4
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