Determine whether your hobby qualifies as a business.
We all have hobbies, but have you ever considered whether your hobby affects your insurance needs? Quite often, these hobbies could require a large investment in relevant property, and in some cases, can even require legal responsibility.
Hobbyists: Collectors or Enthusiasts?
When it comes to hobbies, typically, it will involve either collectors or enthusiasts. A collector is a person that acquires property that appeals to them, such as stamps, antiques, comic books, or sports memorabilia. On the other hand, an enthusiast will collect a certain type of property to pursue a given activity, for example, musicians, painters, cyclists, or hunters.
In terms of insurance, collectors will focus on the nature of the property being acquired, while enthusiasts place emphasis on the attention to the property exposure and the liability inherent to their activity.
Property coverage needs created by a hobby.
Whatever your hobby might be, any special property should be properly insured. A typical homeowner policy will only provide minimal protection for collectibles due to their usually fragile nature and high valuation.
This means that the value of collectibles in a particular room might actually exceed the value of the rest of the home’s property. A regular homeowner policy is not designed to handle such high-value property that could be easily destroyed or lost.
Even in situations where the collectible property is eligible for a policy’s full coverage amount, it still might not be enough. This means you may want to ensure your special property to be covered for a wider range of potential losses. This might mean buying an endorsement or adding additional coverage to your homeowner policy.
In certain cases, hobbyists might need to take out specialty coverage that makes consideration of replacement costs and property that appreciates in value.
Liability coverage needs created by a hobby.
In the cases of those hobbies that are more hands-on, then it is important to be protected against any potential legal liability that arises from the activity. To decide this, you should ask yourself:
- Are there any dangers associated with the hobby?
- Does it involve frequent travel to sites or meets?
- Will it see visitors frequently visit your home?
- Will you be publishing newsletters or giving advice to others?
- Will you be actively selling or trading property on or away from your home?
- Does the activity involve equipment that is inherently dangerous?
Get serious about protecting your hobby.
While many aspects are covered by homeowners’ policy, certain activities might need special or business coverage. The way you spend your leisure time is a happy diversion from work, so it should not be interrupted by inadequate protection. Speaking with an insurance professional will ensure you get the coverage levels you need.
A homeowner policy will usually include a definition of business, and a given policy may use a definition so broad that almost any hobby could qualify as a business. In these instances, a hobbyist or enthusiast should consider whether it is worthwhile taking out a business insurance policy.
For example, say you love taking photos, and you begin taking pictures at weddings or other events to finance this passion. While you might consider this a hobby, your insurance provider might not see it that way. If your camera is stolen while at an event, you might not be covered for the full cost. Keeping that same hobby in mind, say your hot lighting equipment tips over while at a wedding and causes injury to a guest, your homeowner policy will likely not cover the injured party.
Equally, there are a vast array of sales and service jobs such as cosmetics, computer repairs, and music lessons whereby business property is excluded or limited under a homeowner policy. In these situations, a business policy is required. However, many independent consultants mistakenly believe their homeowner policy will provide necessary coverage as they do not have any special equipment or conduct their business outside their home office.
However, office furnishings such as laptops, iPads, desks, chairs, and filing cabinets are typically subject to limitations on a standard homeowner policy. The legal form of a business may create a requirement for business insurance. If a limited liability company, corporation, or partnership is formed, then the related activities will need professional business coverage.
What should you do? The first thing to determine is whether your hobby and activities qualify as a business. Speaking with an insurance professional will help you determine what coverage you currently have and what options you have available to cover any gaps.
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