INSURANCE RIDERS FOR MACHINES

[IBQLTN2]

AS Hurricane Hanna is bearing down on our coast, I am asking myself should I have a rider on my home owners insurance to cover my machine? I jsut recently bought a used Lenni, so we are not talking the same as a Millie with CQ or anything but still replacement would be 10,000. dollars

I am 20 miles from the coast so flooding to the 2nd floor of my house should not be a problem. however wind damage from a potential category 4 hurricane could take off the roof and do alot of damage.

Has anyone considered separate riders for their machines.

Probably not a good time to ask because with a storm bearing down on us it is likely they wouldnt' add it now anyway. Something to consider though. Jeanne

[quiltmonkey]

Jeanne,

I kept a link to this post from a while back--was originally posted by Christine Olson (hotquilts) on 9/8/2006. She has some great info!

Originally posted by Hotquilts

I rarely post on the APQS forums simply because I?ve never owned one so I have no valuable info to share regarding many APQS related matters. Plus, there are so many extremely talented and competent APQS owners and dealers here to assist you that it hardly seems necessary to pipe in with a ?Here, too!? posting on the non-APQS specific topics. However, on the issue of business insurance, I do have some specific knowledge and opinion.

As many on this list (and others) already know, I was once a commercial insurance underwriter and agent. I also am a CPCU and ARM, which is a fancy way of saying ?I am an insurance geek?. I am also married to an insurance geek who is also a CPCU, ARM and currently a commercial lines underwriting manager for a large national insurance company. Consequently, even though I am many years removed from that line of work, we continue to talk ?shop?.

DH and I used to teach a business insurance course at some of the big quilting venues but it just wasn?t feasible when only 10-12 people would register. (Guess it?s not one of those ?hot? subjects. LOL!)

Anyway, I find myself bristling at some of the insurance bashing that occasionally occurs but then I must remind myself that I, too, enjoy a bit of bashing at times. (Only my favorite insurance bashing has to do with health insurance carriers at the moment. VBG)

The sad fact is that there have been and always will be good agents and bad agents, good claims adjusters and bad claims adjusters and good insurance companies and bad insurance companies. It is a disservice to the industry to wipe the entire industry with the same brush, however!

Deanna wrote: ?DISCLAIMER: this post was written by a resident of the state of Florida where homeowner's insurance policies are hard to get and expensive as **** because of hurricanes and insurance company greed.?

Hello??? The loss sustained by EVERYONE due to the hurricanes of these past few years is staggering. Keep in mind, losses all across the country do not stop just because one region has been hit and hit hard! The money for those losses comes out of the company?s pool of premium money and investments. I (and all the other policyholders of the company) am contributing my premiums to a fund that will pay for today?s losses in the hope that when I have a loss, my claim will also be paid.

Property/Liability insurance is a BUSINESS, not a social device! Rates are primarily determined by the odds of you having a loss. The odds of a resident of Florida experiencing a catastrophic loss is statistically much higher than in many other parts of the country. Of course, that area would have higher premiums than say, Idaho!

Insurance companies basically play the odds (okay, with some sophisticated actuarial work and savvy investing). When playing the odds one wants to feel that they have a fair chance of winning. In some areas of the country there isn?t much chance of an insurance company NOT incurring a catastrophic loss! It?s not a question of if a loss will happen but merely a question of WHEN. This makes insurance companies less than enthusiastic about insuring for certain perils (like earthquake, for example). Can you blame them?

Also, if the statement by Bekah (that insurance companies usually win) is true, it is merely because the insurance policy is a CONTRACT. Unlike some other forms of insurance, property and liability insurance has been around a very LONG time. The contracts have been repeatedly tested in the courts over the years, centuries even.

The courts are extremely strict about the interpretation of contracts. There are libraries and law firms dedicated to nothing but this subject.

In the case of insurance contracts there is a standard test commonly referred to as the ?reasonable man? expectation. It works like this: if the contract holds some ambiguity regarding its interpretation or intent, the court will generally rule in the favor of the reasonable man?s expectation or intent. Therefore, the court may give more credence to the insured?s argument since he/she is not expected to know contract law and he/she is in an obvious position of lesser power in comparison to the insurance company.

Insurance companies know this about the courts and sometimes will settle out of court on issues that from a strictly contractual standpoint they should never have paid. (Even if they were to win in court, it costs them money to be there.) Also, insurance companies and courts make mistakes in favor and against insureds.

Sorry, I digressed. Anyway, business insurance for a longarm business?

Just because a governmental agency may classify you as a ?manufacturer? for tax purposes, does NOT mean that you should be rated as a manufacturer on your business insurance policy for the small at-home longarm quilter! A manufacturing risk has exposures that are simply above and beyond those of the longarm quilter.

Below you will find the information I frequently give to people who ask me about how to get an insurance agent/underwriter to understand our business. I hope you find it of some help. In addition, I have included some commonly asked questions and answers regarding business insurance for the small businessowner.

Finally, I have an interactive Property Inventory worksheet on MS Excel that is available for anyone?s personal use. I have also converted it to a print only PDF file for those who cannot open Excel worksheets. Both of these can be found in the Files section of the MQP list. I will also have them available in a few days on my website, www.Hotquilts.com.

This material is protected by copyright and permission must be granted by me to reprint or reproduce the information for use in any training/teaching format or for commercial or financial gain.

Let me know if you have any further insurance questions. I am always happy to try and help but it may take a few days for me to respond, so be patient.

*********************

There are commonly two ways to insure a home-based business, i.e. through a home-based business endorsement added to your homeowners insurance policy or through a separate business policy. The separate business policy will provide you with greater protection through the addition of many more coverages. (Homeowners policies do not allow certain entities such as corporations and partnerships to be added via an endorsement rider. Therefore, your only option will be a separate business policy.)

Most business insurance companies offer a businessowners policy (BOP). The BOP is a much more comprehensive policy that has numerous extra coverages built into the policy form and is the policy type I would recommend. It is composite rated and you may find your premium costs are greatly weighted by the amount of property limits requested.

To help you determine what you might have at risk with respect to your contents, I have an interactive form that can be easily downloaded onto your computer if you have a spreadsheet program such as MS Excel. The form will keep a running total of values as you enter each category's dollar amount. Then you can determine whether you wish to insure all

or part of your inventory.

You may find business coverage through both direct writers (such as Farmers, Allstate, State Farm) or an independent insurance agent that represents many companies. Often the independent insurance agent is capable of providing more competitive bids for your business because they can access several markets.

You will want to have your business insurance placed with a company that has an A.M. Best rating of A or better. A.M. Best is a key financial rating company (www.AMBest.com) that is used by the industry to determine the financial strength of an insurance company. In addition, do not overlook the smaller regional insurance companies. They are often financially strong and very competitive in areas of business some of the larger companies may not be targeting.

One of the problems you may have encountered is a reluctance by some agents to work with you on finding an affordable price for your insurance. This may be in large part due to the fact that they don't truly understand what this industry is all about. Another factor is that it may require a bit more time to research the topic and the low commission payoff does not make it economically feasible for them to pursue your account. However, I assure you there are agents out there that will be happy to work with you, especially if you come armed with answers for them.

Since many agents and underwriters have no idea what a longarm quilter is, I would encourage you to explain that your operations are very similar to that of a tailor/seamstress, i.e. you take materials (usually provided by the customer) and sew (quilt) them together according to the customer's wishes. Your machine is basically a sewing machine, only bigger. However, unlike a tailor, you have less exposure as you do not do fittings on anyone nor are you likely to have a great deal of public traffic if your business is "by appointment only".

(Also, keep in mind that you may be placed in a small retail classification depending on your retail sales and/or other activities. The agent/underwriter will know what the company requirements are for this.)

Even though some states classify the longarm quilter as a manufacturer for tax purposes, do not suggest to the agent that you are in fact a manufacturer (unless you really are, of course). The typical longarm quilter is far removed from a true manufacturing process and might confuse an agent/underwriter thus making it harder to find an affordable insurance policy.

Finding business insurance shouldn't be hard and it shouldn't be too expensive; however, much of that depends on what you choose to cover. A good agent is often the key. Ask other nearby small businesses and longarmers who they might recommend. (BTW, most minimum policy premiums these days run $300 to $750. But remember, it is tax deductible as a business expense!)

FAQs:

? With a small, home-based business, is business insurance really necessary?

First, it is important to note that a personal homeowner insurance contract does not include coverage for your business. It will not provide business liability coverage while business property coverage is typically limited to $2,500.

As a business owner and manager, you do many things to assure the financial success of your business venture. Those activities are too numerous to mention here but include activities such as advertising, doing quality work, being responsive to the needs of customers, having an adequate inventory and supply of tools necessary to do the job, managing your cash flow and expenses, etc. The list goes on and on.

Perhaps the most important business management activity is that of managing the risk of loss. A minor error in any of the above noted categories likely won't destroy or seriously interrupt your business. But what about a major fire and the resulting loss of income, an unexpected legal liability entanglement, vandalism, injury to a customer while on your premises, destruction of business property while off premises or in transit? This list, too, can go on and on.

The most important point here is that a catastrophic loss can destroy all that you have worked for unless you are adequately protected against these unexpected contingencies. Each day we are careful to avoid potential damage by locking our doors, turning off the power, closing our windows, and repairing the sidewalk. If we could completely eliminate the potential for loss there would be no need for insurance. It is the unexpected that we can't control, but we can prepare for it through the purchase of insurance.

The process of insurance is very much like that of participating in funding the cost of your local fire department. You hope that the fire engine never leaves the station, and that your investment returns nothing more than the comfort in knowing that if the alarm does sound, the resulting loss will be minimized by the collective effort of all who contributed to its existence. Just as with the local fire department, insurance cannot prevent the loss, but it can minimize its financial impact.

? My agent has suggested that I cover my home-based business by endorsing my homeowner policy. Are there any advantages to having a separate business policy?

This depends on the insurance company, as each will address the homeowner business endorsement differently. However, the following points in favor of a separate business policy are generally true.

o Many more coverage options than are available with an endorsement to a

homeowner policy

o Separate limit for business premises and operations liability, product liability, personal injury, and premises medical. See below for a more complete description of these coverages

o The business policy can remain in force (uninterrupted) should you decide to move to another location, add a location, move your homeowner coverage to another insurance company, or change the name or legal structure of your business

o Your homeowner loss experience, payment record, or possible cancellation will not affect your business insurance

o Business insurance expenses are more easily identified and tracked for tax purposes

o It is often necessary to add other entities as an additional insured, which is more easily accomplished with a separate business policy

? Will my homeowner policy respond if a customer, who is on my premises for business purposes, is injured while on the non-business portion of my premises?

As the customer was on your premises for business, and since most homeowner policies specifically exclude losses arising out of business activity, your business policy would address the claim.

? I have converted the garage attached to my home to accommodate my studio. Where should it be covered - under my homeowner policy, or my business policy?

A structure physically attached to your home is considered part of the home and would be covered under your homeowner policy. However, the contents of your converted garage and your business operations must be covered under a business policy or, at the very least, a business endorsement to your homeowner policy.

? The terms "bodily injury", "premises medical", and "personal injury" are confusing to me. What is the difference, if any, between these terms?

These can be confusing as each term suggest some form of bodily injury, so why the difference? Actually, each refers to a separate coverage under the General Liability portion of the policy. Each also has its own coverage limit.

Bodily Injury is a reference to injuries the policyholder causes to someone else, either on or off premises, or as a result of injury arising out of the use of the insured's product.

Premises Medical is a coverage afforded to customers who are injured while on the insured's premises. However, unlike "bodily injury", damages are paid with no need to establish fault.

Personal Injury applies to losses arising out of injuries that are not physical in nature, including but not limited to libel, slander, wrongful eviction, false arrest, invasion of privacy, copyright infringement, etc.

(protected by copyright)

Christine Olson

[countrystitcher]

I am an insurance agent: it is probably too late to add it to your policy now - but when the wind dies down...give your agent a call and discuss openly about your machine. Most companies will add a "home business endorsement" for a small premium. Otherwise, some companies will let you increase your personal property coverage to include your machine (the cheapest way to go). It depends on a lot of factors, but there is really no pat answer - just call your agent!

Sharon.

[IBQLTN2]

THANKS FOR THE INFO

I am actually not a business at this point nor do I intend to go into business for a few years at least. so I am sure I should be able to just add it to my policy. most items in your house are covered anyway, but I am not sure if there is a limit to individual items having to be named specifically.

anyway will talk with agent after the storm. Like I say I just got it a week ago anyway hadn't thought about my policy until the storm alerts came up. Jeanne

[Brenni]

The first thing I did when I got my Lenni was to call my insurance company. I was told it was covered along with the general contents of the house, not like an electronic or something special you have to name specifically, since it is hobby only. I always take photos of my house and send a CD to my sister along with scanned in receipts in case there are any questions and include any of the goodies like my sewing supplies.

I moved from Charleston last year. I don't miss the hurricane threats at all. Hope it swings east.

[Primitive1]

Shana,

Thanks for posting the information on insurance coverage. I just happened to call my homeowners insurance today to ask about coverage on my machine (Milli) and was told that it was indeed limited to $2,500.00 which we all know would not do it!

I also happened to ask about liability insurance coverage as I do have occasional customers in my home. The Hotquilts.com site is currently under construction but my question is......

Does anyone reading this have any suggestions and/or recommendations for insurance companies that they have delt with for coverage? I wondered if some companies specialize in coverage for long arm business and/or equipment.

I am not expecting a hurricane, or a customer to trip and fall (I keep my house pretty clean but one never knows.....

Thanks,

Vicki

[Patricia]

I work with insurance claims--so by the time I get a 'loss' the water is under the bridge, no pun intended. Not only are machines at risk for water/wind, but also power surges which can fry computer components and the like. I agree w/the disclosure to your insurance agent--BTW, there are 'captive' agents and 'independent agents'. If you are insured with a 'captive' agent, then you are dealing with an employee of that carrier. If you are dealing with an 'independent agent' then that agent can check with several different carriers on your behalf to find coverages available to best fit your specific situation.

If you have not yet done so, find yourself an independent agent to discuss your situation with. Sometimes a package deal with homeowners and/or business owners, auto and umbrella coverages (if you desire umbrella coverage) is the best way to go.

You can go to your state's department of insurance and research carriers and find agents (I believe). Otherwise, just ask around and it won't take many inquiries to lead you to an independent agent in your area. Best of luck to you.

Patricia Best

Greenwood, IN

[eswindy]

First thing I did was call my business insurance agent and add my machine and just in case, something happened to a customers quilt that it would be covered. Just as my husband has garage keepers for his Auto Repair business. He said I was covered!

[IBQLTN2]

Brenni

Were you a member of Cobbleston Quilt Guild in Charleston? Maybe we know each other. I have been a member of the guild for 13 years.

my machine is for hobby also so maybe it is covered as well. I do have pictures on my camera and on the web so proof is there it was here before the Hurricane. I feel better now.

It seems to be less severe than earlier but things like that change quickly. Pray for us on this one and the next 3 or 4 looks like we are in for a fun September. LOL Jeanne

[RitaR]

I think everyone really needs to check with their ins. co. With ours, any one thing over $2,500.00 has to be separately stated as owned and covered, this the Viking and the APQS, .. and they suggested for a home business, to get an umbrealla policy.. very cheep for a Million of coverage, but again, make sure it covers the equipment, your customers quilts and their possible injuries.. some are much more specific for one thing, than they are for a blanket type coverage. Don't be left hanging in left field when a 10 min. phone call should give you the info you need.

RitaR

[Brenni]

I was a member of Cobblestone QG. Your face looks familiar. I really miss that guild. It was the first and only guild I have ever joined. They are so giving. I enjoyed the quarterly sewing get togethers and the hour long show and tells. I just could not believe how many quilts they made for various charities. The number of QOVs the guild produces is incredible.

[victoriasews]

I finally got around to checking on insurance and was shocked to find it would be over $700 a year. That's more than I pay for my car and there is a much greater risk of a car accident that something happening to my machine.

[JudyLynn]

I have a George, and when he arrived I called my State Farm insurance agent and he just uped my content coverage by the $8,000, the cost of George. Maybe after reading some of these replies I need to ask him a few more questions. They sure don't mind taking the premiums, but when it is time to pay out, a different story.

[IBQLTN2]

Brenni

that's true we are a pretty active group, I hope you were able to come to one of our shows. Only every other year, but they are incredible. JP

[Mrs.A]

Well, Jeanne, lots of good answers to your query. Here is my two cents: I own a George but do not quilt for others as a business. My concern regarding insurance was that I am entering quilts into competitions and shipping quilts all over the country. My regular homeowner's insurance (Allstate) does not cover my quilts when they're away from home (even if I have a formal, written appraisal). The cost to insure a quilt for it's appraised value when shipping with FedEx or UPS is enormous. I found an insurance policy which will cover my quilts (whether at home or away) AND my machines, and my stash, books & quilt related items. I set the value of the insurance coverage I want and then pay an annual premium. I found the agent through a website for 'lost' quilts. You can contact the agent in Arizona, chris.johnston@hubinternational.com for more information. I can't comment on how easily the policy pays off when there is a loss because I've just purchased it (shipping two quilts to Houston! this week) and I hope I never have to find out. I can say that Chris has been great to deal with (all via email) ...very responsive and knowledgeable. I don't believe this policy would cover any aspect of your BUSINESS, but for your machines, fabric & quilt inventory it seems to be a great option. Hope this helps, Nancy A.

[IBQLTN2]

Thanks for the info Nancy, I think it is worth looking into escpecially if it covers quilts being shipped off to shows. My expertise level is not up there yet as a beginner, But I HAVE HIGH HOPES!!!lol Jeanne

[Hotquilts]

I am playing catch up on this site. (FYI, captive agents are also commonly referred to as direct writers.)

Regarding the policy provided through Chris Johnston, is this a single policy under your name or a group policy? The reason I ask is that group policies tend to be cheaper but may carry some concerns regarding policy limits, i.e. is it an aggregate limit in which all losses come out of that one limit. If a convention hall burns and everyone on that policy had a quilt at that event, how quickly would those limits be depleted? The odds are probably in your favor that this is not ever going to happen BUT it is a consideration.

There are other options to covering your items when in transit but not all personal lines agents may be knowledgeable of them.

Another good reason to find an experienced agent in both personal and commercial lines of business.

[Hotquilts]

Originally posted by RitaR

I think everyone really needs to check with their ins. co. With ours, any one thing over $2,500.00 has to be separately stated as owned and covered, this the Viking and the APQS, .. and they suggested for a home business, to get an umbrealla policy.. very cheep for a Million of coverage, but again, make sure it covers the equipment, your customers quilts and their possible injuries.. some are much more specific for one thing, than they are for a blanket type coverage. Don't be left hanging in left field when a 10 min. phone call should give you the info you need.

RitaR

Umbrella policy? Then you better be sure it is not a "following form". This would mean anything excluded on the underlying policy (your homeowners) would also be excluded on the umbrella. Therefore, it would not be serving the purpose you had hoped.

Umbrellas are very useful for providing additional liability limits of coverage and even covering some types of losses that might not be covered on the underlying policy (sometimes referred to as a DIC -Difference in Conditions policy). Since most umbrella over personal lines policies are "following form", they often don't provide what the insured had intended.

READ YOUR POLICY CAREFULLY!

[mountainmanda]

I reccomend that you get what is referred to as a Personal Articles Policy. I have added this particular type of policy to my homeowners just in case. It covers items that would not normally be covered under a homeowners policy, like jewelry of certain $$$ value etc or in my case my Precious Milllie and all my leftover supplies from when I closed my quilt store last year.

[Hotquilts]

Originally posted by countrystitcher...Otherwise, some companies will let you increase your personal property coverage to include your machine (the cheapest way to go). ...

Sharon.

Because the typical homeowners policy specifically addresses the property and liability limitations dealing with any type of business venture, it would be very unlikely that increasing one's personal property coverage to include the cost of a longarm would provide any coverage beyond the usual standard $2,500 that most homeowners policy provide in their coverage form.

FWIW, if one is doing quilting as a business (hobby or primary), a business policy or business endorsement is the safest way to go. Keep in mind, that unlike your homeowners insurance, your business policy premiums are a business expense. Therefore, you do get some limited relief for the cost of it at the end of the year.

Christine Olson

Chartered Property Casualty Underwriter

Associate in Risk Management

[Hotquilts]

Originally posted by mountainmanda

I reccomend that you get what is referred to as a Personal Articles Policy. I have added this particular type of policy to my homeowners just in case. It covers items that would not normally be covered under a homeowners policy, like jewelry of certain $$$ value etc or in my case my Precious Milllie and all my leftover supplies from when I closed my quilt store last year.

Although this could be an option for some, it may not be for many. Insurance forms are not standardized per se. One must ask "what defines 'personal articles'". If your business activities preclude you from scheduling your expensive longarm machine on such a policy, then it would be a waste for the business owner to purchase it. ( Always read the entire insurance contract/policy.)

It might be more prudent to pursue an actual business policy if the equipment in question is being used in a business endeavor.