Business use of your home, car or
equipment calls for extra insurance
By Kyle Parks • Bankrate.com

Alan Sayler, who runs a thriving water conditioning company, found out long ago why it's important for a small-business owner to have the right insurance coverage.

Ten years ago, when he was just getting his Sayler WaterCare company started in St. Petersburg, Fla., an employee driving her personal vehicle got into an accident. Thankfully for Sayler, he had extra coverage on the vehicle that took into account its business use.

"I have been real sensitive to insurance issues since I started my business," he says. "You never know what's going to happen."

Liability risks
Small-business owners often use their homes, their vehicles or their own equipment in their jobs. But standard home and auto insurance policies don't take such uses -- and extra liability -- into account. So the business owner needs to have extra coverage, insurance experts say.

In some cases, it might be as simple as an extra rider on a homeowners policy, but it could also be as involved as a commercial policy that's completely separate from personal home or auto coverage.

"Liability is always an issue to think about," Sayler says. "I am very careful about who I hire in terms of their driving record, for instance. I could be sued for negligent hiring. People who don't take proper precautions, it's like putting a bull's-eye on their head for the personal injury lawyers if there's an accident."

For small-business owners, there are three key areas to think about in getting extra coverage -- your home, your vehicle and your personal equipment.

Your home
"Even if the UPS man comes in and trips over the carpet in your home office, you have a problem," says Kim Cole, an accountant who advises business owners for the Small Business Development Center in Tampa, Fla. "And if you have a fire or theft, your insurance may not cover special equipment you have for a business."

Many basic homeowner policies only cover office equipment up to $2,500, says Bill Wanless, an agent with Mutual Insurance in St. Petersburg, Fla. So get a good estimate of what your office equipment is worth, and get coverage for it.

Also, there are liability issues for people who have customers or clients visit their home for business.

"That might be salespeople, tutors, day care, you name it," Wanless says.

There are limits on what most insurers will put on a homeowner policy. For instance, it might be hard to get as much as $20,000 coverage on such a policy for office equipment. Many insurers won't allow a home policy to cover certain types of businesses, such as a child-care facility.

In those cases, a commercial policy is probably the best bet, says John Best, a field executive for State Farm in Clearwater, Fla. "There are also other advantages to a commercial policy," he says, "like coverage to cover an event that might force an interruption of business because of something happening to your home."

The cost: Adding more coverage to insure more equipment doesn't have to be expensive.

Let's say a homeowner is running a sales business out of his $150,000 home, and he has $7,000 worth of office equipment. He also has to worry about liability issues because of occasional client visits and deliveries into his home. The extra coverage on his equipment -- above and beyond what a standard homeowner policy would cover -- would cost about $45 more a year, Wanless estimates, while upgrading his incidental liability coverage to $300,000 would cost an extra $17 a year.

Your vehicle
Mike Nardozzi, a Realtor who splits his time between St. Petersburg, Fla. and Maggie Valley, N.C., estimates that he puts as many as 30,000 miles a year on his sport-utility vehicle for work.

"You have to protect yourself," he says. "St. Petersburg is in the most densely populated county in Florida. When you have someone in your car at least three days a week, showing houses to clients or whatever, you have to think about the possibility of an accident."

Nardozzi carries extra coverage on his vehicle, and he has been frank with his insurance agent about how much he drives for work. That's a plus.

"If you haven't told the truth about using your vehicle for work and you try to make a claim that covers something while you were working, that is going to cause a problem," Wanless says.

In many cases, business owners can either get a limited-business use policy or full-business use policy. The cost, of course, depends on how much you use the vehicle for work, along with other considerations, such as where you live, your age, your driving record and the type of vehicle.

For instance, you'd probably pay less if you are using the car once a week for work than if your teenage son is using the car to drive 25 miles a day for his job.

The cost: To give an idea of what extra coverage might cost, consider a 30-year-old woman who drives a 1997 Jeep Cherokee. She has a good driving record.

First, assume she drives 10,000 miles a year and doesn't drive for her job.

Then, for comparison's sake, imagine that she then gets a job that requires her to drive 25,000 miles a year for her job. If she carries the recommended amounts of coverage, her insurance premium could change from about $530 every six months to about $680, Wanless estimates.

Your equipment
This type of coverage could be for anything from a handyman's tool kit to a laptop computer you use for job assignments. Increasingly, professionals such as house appraisers and insurance agents do much of their work on the road with cameras and laptops, so this type of extra coverage is increasingly common.

The cost: Let's say a handyman carries $10,000 worth of equipment with him and wants a policy that will let him buy comparable equipment if something happens to it. He'd probably want to include it in a general $100,000 liability policy, Wanless says.

The estimated cost of that coverage -- about $560 a year.

"Much of the equipment coverage we offer is not required in terms of liability protection, but it probably is a good idea, also from a theft standpoint," says Mutual Insurance's Wanless. "But I know a lot of handymen, for instance, don't carry such coverage. All I can do as an insurance agent is advise someone. We are not the police."

If the coverage becomes more extensive -- say, if a handyman has more than $3,000 worth of equipment -- a commercial policy might be in order.

Insurance agents won't give prices for these types of coverage without knowing a specific situation. The important thing, they say, is for business owners to give them complete information so there aren't any surprises later.

"The key thing is to talk to the insurance agent and be upfront on your situation," says the SBDC's Cole. "In some cases, you may be able to write off the insurance expense as a business expense, which can help."

Kyle Parks is a freelance writer based in Florida

-- Posted: Oct. 21, 1999