Tuesday, February 14, 2017

Public Service Announcement: Business Personal Property Insurance in your Homeowner's Insurance Policy

If you are a small business owner that operates out of your home, PLEASE read whether you are Lularoe, Senegence, Thirty-One Bags, Scentsy, Perfectly Posh, Chloe and Isabel, Arbonne, or Pure Romance.

I've been trying to get this message to everyone I know, but particularly my Lularoe girls since you all have the MOST in inventory. I don't want to see any small business owner go under because they just didn't realize they weren't properly covered. I know this is boring, but please read it. I pray that none of you are ever in a situation where you are saying to yourself in tears, "WHY didn't I read that insurance girl's blog!?!??" after your adjuster informs you that they can't do anything for you in the event of a fire or water loss. The definition of business personal property: "Building, equipment, fixtures, furniture, merchandise, etc., identified in an insurance policy as owned by the insured and used in his or her business. Also called contents." Everyone close to me knows that I am a 20-year general insurance adjuster for property insurance licensed country-wide, and I know the policies really well. PLEASE PLEASE PLEASE make sure that you know what you are covered for on your homeowner's policy. Anything that you have purchased for selling Senegence or Lularoe or whoever you distribute for is considered "business personal property".

It doesn't matter that it is yours or that it is located in your home. It is used to garner a profit and thus it is in a different class of contents than your furniture, clothing, kitchen stuff, etc. Even if it is a tester that YOU use for yourself, it is BPP because you use it in your business. I can't even tell you how many Mary Kay reps or photographers that I have disappointed when I have limited or denied their claims when they lose their business personal property in a theft or a fire because they didn't know that they weren't properly insured. And don't think you will fool your insurance adjuster either, because we can tell the difference between stuff for a hobby and stuff for business.

Now, pay attention, because this is particularly important. SOME policies have language in them that excludes "articles for sale or distribution". Yes, ladies and gents, that applies to ANY INVENTORY YOU HAVE IN STOCK. Your policy may not say that, but I've read a LOT of policies countrywide that have that language in them. When you call your insurance company to check, have them read the portion of the policy that pertains to that AND have them send you a copy if you don't have one in your records. You also want to find out what your limits are for your BPP (business personal property) ON-premises (while it's in your home) and OFF-premises (after you pull out of the driveway) because there is a difference, and make sure there are no exclusions for certain perils (such as water or collapse or vehicular accidents).
Some real life examples:

1) You are in a car accident on the way home from a trade show. You lose ALL of your stuff because the back of the car where your stuff was located was crushed or damaged when you were rear ended. Based on your policy, you may get a very small amount on this or NOTHING. Your automobile policy only covers what is attached TO the car, not property located in the car.

2) Your house has a kitchen fire and your room where your inventory is located is only affected by smoke. Your inventory will be totaled because it is personal cosmetics and there is no way to clean that. Even Lularoe inventory is totaled because the tags will be ruined by smoke with no way to clean them. Based on your policy, you may get a very small amount on this or NOTHING.
3) You have the tissue paper, mailers, inventory, boxes, and what you wear to events on the floor. Your water heater floods your home and everything is ruined in that room because the colors bleed all over the place. Sure, the damage to your house is covered, but what about your business stuff? Based on your policy, you may get a very small amount on this or NOTHING.

TIP: Please don't rely on what your insurance agent says. I love the agents, and if they didn't sell policies, I wouldn't have a job handling claims, but most of them have NO idea how to read the policies that they sell. Make sure that you talk TO your company AND get a copy of the policy so you can read it for yourself to make sure you are properly covered in the event of a fire, theft, water loss or auto accident.

For me, I have USAA so I called today now that my Senegence inventory is starting to come in, and my particular policy in Texas covers my business personal property up to $10,000 on-premises and $1,000 off-premises. They don't have any exclusionary language about perils (what caused the loss) and nothing about "articles for sale or distribution" so my inventory is covered. I'm a tad concerned about the $1,000 limit off-premises, but right now I'm so small that my equipment that I'm taking to events doesn't exceed that. However, if I ever get to the point where I have inventory of everything Senegence makes, I will likely have to get a separate small commercial policy. Everyone's situation is different. I have seen a number of policies cover business personal property up to $2,500 on premises and $0 off premises, so please, make sure you know what you are dealing with so you are not caught off-guard. For the time being, I won't be leaving ANY of my inventory unattended JUST in case. I doubt that my LipSense will be the first thing a thief will go for, but makeup divas can get pretty crazy about lipstick.

Keep in mind that your house, even though you probably have a room or a closet dedicated to your
business, is going to be covered no matter what, so if you have shelving or racks or anything permanently installed in the room, you're good; it's just the loose "personal property" that this applies to. In order to quickly expedite your claim, make sure that you have current records of everything you keep in inventory and the current replacement cost. NOW, keep in mind that replacement cost where we are concerned is going to be the replacement cost of that item, which is wholesale. You can't make a claim that you lost retail value on a pair of leggings or a tube of lip color when it only costs wholesale to replace it. Now, if it is something like the Diamond Collection which is now gone and you can't replace it or the Elegance Collection that you can no longer order, that is a different story, but if you have records on how much you paid for it, the insurance adjuster will have something to work with.

NOW, if you have a separate structure such as a detached garage or a shed that is used SOLELY for your business, please check your policy on this because most policies exclude any separate structure that is used for business purposes even if it is on your land.If something happens to your things while you are at another location that is the fault of that homeowner or business, you can always file a claim with their liability insurance, but you're going to be made whole a LOT faster (i.e., be paid) if you make sure that you have your own insurance. Your carrier can always go after the other party if needs be.

Lastly, do not be concerned about your deductible, as most carriers apply the deductible to the LOSS, not to the limits. In other words, if you have a $1,000 deductible, and your limits on BPP are $5,000 and you have a loss of $7,000, they are going to pay you $5,000. See example below.

$5,000 (PAYMENT; limits are less than the loss)

However, if your loss is under the limits, then the deductible will apply so keep that in mind. However, if you have a large loss in your home, it's only going to be one deductible, not two separate.

If anyone needs any help with this issue or just wants me to review your policy, please message or email me. You can just photograph the portion of the policies that you have questions about. I am licensed in every state that requires a license, so please, reach out to me with questions. Comment here if you have a question that you feel like the answer to could benefit others. I hope this was helpful. I know it wasn't fun, but believe me, crying because your kids put macaroni and cheese in the microwave without water and totaled your business is WAY WORSE. Not a fun subject, but I hope it was educational!!

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