Side Gigs From Home Are Booming. Is Your Insurance Keeping Up?

The Appeal of the Side Gig

Engaged in some gig work in the garage, merch-making from the basement, or another home-based enterprise? If you’ve recently started a side hustle, you’re not alone: Nearly 1 in 3 Americans have done so to supplement their earnings.^[1] And around 19 million U.S. businesses operate out of the owners’ homes.^[2] That’s little surprise, considering the higher cost of living and increasing job uncertainty in the corporate world nowadays. 

Being an entrepreneur under your own roof can simplify matters and reduce costs, especially because you don’t necessarily have to drive or leave your property to earn money. But whether you’re selling on Etsy, tutoring kids after school, renting out a spare room, or freelancing full-time, you could be vulnerable to homeowners insurance gaps.  

Let’s take a closer look at why, and what you can do to financially shield yourself from insurance risks.

Your Homeowners or Renters Policy Was Written for a Resident, Not a Business Owner

Standard homeowners and renters insurance policies cover personal use of your home, not business activity. Once you begin earning dollars from your gig work or small business being run from your property, the coverage question becomes more complicated.

“Homeowners and renters policies are designed for personal property and personal liability. They may provide limited coverage for business equipment, but may exclude business-related injuries, professional mistakes, lost income, inventory, and customer claims,” says Dennis Shirshikov, a professor of finance and economics at City University of New York/Queens College.^[3]

The biggest risk is a denied claim. If your policy is written particularly for you as a homeowner, it won’t necessarily safeguard you if your carrier learns you've been operating a business there without telling them. And that denial could result in serious financial consequences.

“Some activities are inherently riskier than others, such as having clients or customers in your home, which is a different risk profile than simply selling items online,” notes Beth Swanson, insurance analyst with The Zebra. 

If you are running a business from your home or plan to do so, inform your carrier immediately. Prepare to disclose details like if and when customers visit, any employees who work under your roof, and how much equipment or inventory is stored on your property.

“The good news is that you can usually tailor your coverage to match your actual risk, and a skilled insurance agent can walk you through the options,” Swanson adds.

Service-Based Side Hustles

If you regularly invite customers or clientele onto your property, you could face general liability exposure if someone is hurt during the visit, or professional liability exposure if that visitor alleges that your service, advice, or instruction caused them financial loss or harm.

“Someone like a tutor, hairstylist, or music teacher may need both general liability and professional liability coverage,” Shirshikov continues. 

The former covers accident or bodily injury claims; the latter covers less visible risks, such as errors and omissions. Shirshikov recommends at least $1 million of coverage per occurrence and $2 million in aggregate coverage for general liability, plus $1 million in professional liability coverage.

“A business owners policy (BOP) combines property coverage, general liability, and business interruption coverage, and can be a good option. But there are specific requirements to qualify, so it may not be available for all home businesses,” says Swanson. “It’s best to talk with an independent agent or broker about your specific situation and find something that fits.”

Remote and Digital Work

Freelancers, designers, virtual assistants, consultants, and other providers of digital work, as well as those working remotely from home, represent the lowest-risk category from an insurance perspective. Yet, there are gaps to be aware of here.

“These professionals may face risks involving professional errors, client disputes, cyber incidents, equipment losses, and business interruption,” Ruiz points out.

Thankfully, policies exist that fit almost any type of remote or digital work. Case in point: Media liability coverage is available if you’re a content creator, which is sometimes required if you have brand sponsors for videos or other content. This protection can help with issues like copyright infringement claims.

“Also, cybersecurity may not be covered under a standard homeowners policy, so you might need a stand-alone option for that,” adds Swanson. “Professional liability coverage is important, too, but there can be real gaps in coverage for people creating content on social platforms, like freelance graphic designers or consultants.”

To play it safe, discuss available options with your insurance agent, inquire about endorsements that could add additional protection, and ask about exclusions that may apply.

Renting Out a Room (House Hacking)

Leasing out a portion of your home to a paying tenant can create property and liability risks that are different from standard owner-occupied scenarios. Be sure to disclose this renting arrangement to your carrier before the renter moves in. 

“Your insurer may allow a homeowners endorsement, require you to get an owner-occupied landlord policy, or recommend a dwelling-fire policy with liability coverage. Have your home insured for replacement cost, not market value,” says Shirshikov, who recommends at least $500,000 in premises-liability coverage where available and a $1 million umbrella policy for extra protection.

It’s also smart to have a solid lease in place and require your tenant to carry their own renters insurance.

“Your tenant’s belongings need their own coverage, not yours,” says Swanson. “And if you’re doing more of a furnished or short-term rental setup, make sure you have replacement cost value on the furnishings and items in the space.”