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SANDY — Having a side hustle to bring in extra cash requires determination and hard work.
If you do it without the right insurance policy, you might find an unexpected event could blow up your side hustle along with your finances.
Debra Gamero says she has been teaching piano out of her Sandy home for 55 years.
While ‘piano instructor’ isn’t what one would consider to be inherently dangerous, in that half-century, Gamero has experienced a couple of risky moments. Several years ago, a fender bender that happened just as a student was arriving led to an auto insurance claim. And she used to have a dog until it nipped a student. That led to a homeowners insurance claim.
“And the homeowners did pay the bill, but they canceled (the policy) as soon as they did,” she said.
In truth, Gamero may have been lucky that the claim was paid. According to the Insurance Information Institute, most homeowners policies specifically exclude business liabilities – such as a customer of a home-based business that gets hurt. What’s more, a typical homeowners policy only covers up to $2,500 in business equipment. That’s not nearly enough to replace the hundreds of thousands of dollars’ worth of pianos and sheet music in Gamero’s home should they get damaged or destroyed – a prospect she says she thinks about every year.
“Because I know situations arise,” she said. “Accidents happen and I worry as to whether I would be able to afford the expenses that might come up.”
Underinsured side gigs
It is a legitimate concern David Andrist of Bear River Mutual said. He said his company has seen the issue of insuring side hustles creep up in recent years as more people work from home more often.
“If you’re running a business, then you might need more of a business policy,” Andrist said.
He says many home-based businesses do not have adequate insurance. Whether it’s teaching music, preparing taxes, cutting hair, building stuff in your garage, or even reselling stuff online.
Just about all home-based businesses have some exposure that the business owner may think is no big deal.
“It could turn into a big deal if somebody slips and falls on your premises,” said Andrist.
One issue he’s seen recently involves child care. In the eyes of an insurer, you may be running a day care right now and not even realize it.
“Especially if it’s for free,” he said. “People like just watching other people’s kids and then someone gets hurt. There can be some coverage complications there.”
The costs of protecting your side hustle
Independent Insurance Agents of America conducted a survey and found that most people who they consider to be “underinsured” said “they thought their homeowner policy covered their business.”
If a home-based business owner wants more insurance, there are essentially three options: You can get a bona fide business policy, which can become expensive. Then there is an in-home business insurance policy which typically costs around $300 per year. Or, you can get an endorsement on your homeowner policy, which likely suffices for most people.
“Many times, you’re talking about $10 or $20 (monthly),” Andrist said. “Changes to your policy that could pay out tens of thousands of dollars.”
As for Gamero, she says she is still playing with her options.
“That might not be money well spent when I don’t have that many opportunities to use it,” she said. “I mean, in 55 years, I’ve had two minor incidents.”
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Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.