Lew Sichelman

Working out of our homes has been part of the American culture since the country was founded. But the pandemic has forced more of us than usual to do so. And some folks who have lost their jobs as a result of the virus have started home-based businesses to get by.

There’s no telling how many people now work from home, or WFH in today’s jargon. Ten years ago, the Census Bureau said 6.6 percent of the working population worked from their residences. But in 2016, according to a Gallup poll, 43 percent of all workers said that they spent at least some of their time working in a location different from their co-workers – up from 39 percent in 2012.

As recently as 2018, the Bureau of Labor Statistics said 35.7 million – a whopping 25 percent of the total workforce – worked out of their houses. And those numbers have undoubtedly increased as COVID-19 continues to run rampant.

Many laid-off people have started in-home businesses – sewing face masks, cutting hair or mowing lawns, for example – just to survive. Some of the other popular home-based businesses include tutoring, personal training, catering, daycare, home repairs, bookkeeping and housecleaning.

But whether you run a business out of your abode or just work there remotely, you should be aware that you could be breaking the law – or at least the rules of your homeowners’ or condominium association. Even if you are legit, you should make sure you are properly insured.

There’s good reason to regulate home-based businesses. After all, they can alter the residential character of a neighborhood by generating unwanted traffic, taking up scarce parking spaces or creating objectionable noise, obnoxious odors or unsightly conditions.

Local zoning laws address these issues, as do most owner associations. Many at-home workers hide their enterprises, fearing they could be shut down, but questions rarely surface unless a neighbor complains or the worker flaunts the law. And neighbors don’t usually speak up without good reason. For example, my wife’s mechanic was forced to move his backyard business elsewhere when neighbors complained about cars parked all over the place.

If you operate a business out of your house, take great pains not to annoy those living around you. Just in case you do raise the wrath of a neighbor or the authorities, it’s a good idea to look around – on grocery store bulletin boards or in the local paper, say – for other businesses that may also be in violation of the rules. The owners of those businesses could become your allies in any confrontation.

Ensure You’re Insured

When it comes to insurance, most home-based business owners don’t think they need additional coverage because they are protected under their homeowner’s policies, or that their businesses are too small to insure. Wrong on both counts!

Generally, a homeowner’s policy provides no more than $2,500 to replace damaged or stolen business equipment, and doesn’t include business liability or business interruption coverage. These, according to the nonprofit Insurance Information Institute (III), are essential if an employee or customer is injured on the premises, or if a loss requires you to shut down for an extended period.

Insurance companies differ widely in the types of business coverage they offer, so it is best to shop around. The best choice will depend on the nature of your business. A tax preparer, for example, will have different needs than someone who operates a daycare. The three main types of coverage are:

Endorsement. For an additional premium, you can raise your policy limits on home-business losses to $5,000 or $10,000. Such a rider is your least expensive option, but it may not be sufficient to cover a lot of expensive equipment, and it does not include liability or interruption coverage.

Generally, a home-business endorsement is good for folks who have only a few business-related visitors, or none at all – such as syndicated columnists or other writers. Tutors and piano teachers may be eligible, too, depending on their number of students.

Separate policy. Somewhat more comprehensive, an in-home business policy covers business equipment and liability. It will also reimburse you for the loss of important business papers and records, such as accounts receivable, and cover off-site business property. Some will pay for lost income if your house becomes unusable due to a fire or natural disaster, and some might even pay for the extra expense of operating out of a temporary location.

The cost ranges from $250 to $500 or more, depending on the type of business, number of employees, safety features in place and amount of coverage.

Business owner’s policy. Known in the trade as BOP, this type of coverage is based on the size of the premises, the limits of the required liability, the type of commercial operation and the extent of off-site servicing and processing activities. It also covers any personal vehicle that is used for business purposes.

To keep your costs down, industry nonprofit III suggests starting your hunt for coverage with trade associations or business groups. These outfits often provide coverage at reduced rates based on the volume of business they can offer an insurer and negotiate coverage specific to your type of business.

Absent that, make sure you work with an agent who understands your type of business. And again, shop around.

Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.