Residential Issues

If you want to work in a residential space, insurance issues can become complicated. Not only are you balancing the requirements of a lease or mortgage company, but you are also dealing with zoning laws and building codes that regulate use of residential space. Added to this already complex formula is the need to protect your property from damage or loss, and at a price you can afford.

It might be difficult to locate an insurance policy that will cover your live/work arrangement. Some providers will cover the living portion of the space, but not the workspace -- or exclude certain art or business activities from coverage. Other policies might cover both needs, but cost too much. Don’t panic: Understanding the issues involved in insuring residential space enables you to better locate the type of policy that meets your needs, in terms of both coverage and costs.

When it comes to insuring a workspace in a residential setting, providers consider two primary issues:
1. Does your use of the space require special and/or additional coverage?
2. Are you using the space for commercial purposes?

If you own your space, read and understand the fine print of the homeowner’s policy. Some policies will specifically exclude coverage for certain activities such as welding or operating a business on the premises.

If you convert your third bedroom into a small clay studio, and teach art workshops out of your home, you might be in danger of not being covered if a disaster strikes. This can occur if the insurance company views either activity – the teaching or the studio -- as a business, and voids the policy.

This may also be the case if you are renting a space in another residential building -- for example, if you rent the room in your neighbor’s coach house as a rehearsal space. In addition, if your workspace is in an outbuilding such as a coach house or work shed, your homeowner’s policy might not cover the building at all, and separate coverage for this space might be required.

Some providers offer insurance that specifically covers an art studio in residential spaces. This type of insurance policy is often known as an artist studio rider, and can be added as an addendum to an already-existing homeowner’s insurance policy. Some home-based business policies specifically cover arts and crafts ventures.

Whether you do or do not collect income from your artwork can also determine if your primary homeowner’s insurance policy will be honored. Some policies allow for hobby use, meaning there is little to no financial gain from the activity. However, the moment you began making money from the activity on a consistent basis, your “hobby” might be considered a business, and your coverage voided. Certain hobbies might be excluded from coverage under a hobby clause.

In the above example, if you rent the coach house studio, you still must check the property owner’s policy to make sure the building is covered, and that your activities in the space are not excluded. Even if you do not sell your artwork, the homeowner’s insurance provider might view the rental arrangement as a business and void the policy, leaving you at risk in the event of a disaster. In addition, you will probably need to obtain additional insurance to cover your personal belongings, art work, equipment and supplies.

If you are renting a live/work or residential-only space, obtain adequate coverage to protect both your art and other property (clothes, furniture, equipment, etc.). Although a conventional renter’s insurance policy will cover your basic belongings, make sure your policy does not exclude artwork, supplies and expensive equipment. If so, you may need to obtain additional coverage (See Types of Insurance Policies).

Just as if you owned the space, make sure the building owner’s policy is not voided if you run a business out of your unit, or use the space for certain activities (i.e. welding, dance studio, etc.). If you are renting a residential space, take these precautions regardless of the type of space you are using (house, flat, apartment, etc.).

Ask your landlord which type of coverage s/he has on the building, and make sure they agree -- preferably in writing -- to your use of the space. If you use the space in a manner inconsistent with what the lease allows, you might not be covered in the event of a calamity. You could also face eviction.

For more detailed information on insurance issues associated with leasing residential property, see Chapter 6: Residential Leases.