Estimated reading time: 7 minutes
Let’s get one simple truth off the bat. It’s a fact that can catch just about every creative entrepreneur I meet off guard.
If you’re an Etsy seller running your shop from home, your homeowner’s insurance isn’t going to cover you when something inevitably goes wrong. Guaranteed.
I’ve been there. You’ve been there. I’ve talked to makers, crafters, artists, candle makers, jewelry designers, soap makers, vintage resellers, and any other Etsy seller you can think of who thought their home insurance was taking care of them.
“It’s all in my house. This is my home, of course it’s covered.”
It’s never that simple. I’m not saying your home insurance policy covers nothing (we’ll get to that in a sec). But when it comes to Etsy business activity, your standard homeowner’s policy will let you down.
Home Insurance Doesn’t Cover Business Activity
One thing that home insurance covers really, really well is home ownership.
Protecting your home as your personal residence is what home insurance does.
Home insurance was never meant to cover the moment you decide to open that Etsy shop and start selling online.
The moment you start taking orders, to your insurer, your home transforms into mixed-use property. From their view, your policy doesn’t cover it.
Look, it’s your home, right? It’s where you live. You live, so you create. You create to sell, right? It’s your Etsy shop. You use your home to do it. It’s a home business. Done and done, right?
Eh, not so much. Selling even a few things a month to the public changes the rules.
Your insurer sees it very differently. That 3D printer, those molds, raw materials, bins of candles waiting to ship are no longer your “personal property.” They’re business assets and most home policies specifically exclude business assets beyond a few thousand dollars, often less.
Your Home Insurance Wasn’t Built for Business
Most people don’t see the need for additional business insurance until they get smacked with a big bill or denied a claim.
Here’s a quick breakdown of what a standard homeowner’s insurance policy will cover.
Coverage includes the structure of your home like the walls and roof against things like fire, hail, wind, theft, vandalism, lightning, most floods and other “Acts of God.” It also covers personal belongings like clothing, furniture, home electronics like TVs, computers, and appliances. Personal liability if someone is injured in your home against things like negligence during strictly personal activities like cooking or entertaining.
Even some coverage for living expenses if a covered event makes your home uninhabitable.
Pretty good, right? Your standard policy does a nice job covering you. But read closely. Notice those key words: personal belongings and personal liability. Personal. Anything that ties back to commercial activity, particularly things you make to sell or generate income, falls outside that safety net.
Your Etsy business probably includes any or all of these business assets, all of which your basic homeowner’s policy likely excludes:
• 3D printer
• Custom molds
• Raw materials
• Finished product inventory in bins waiting to ship
• Packaging materials, boxes, tape, labels
• Packaging tools, tape guns, ribbon cutters
• Label printer
• Laptop
• Printer
What Home Insurance Covers
Before we talk about what’s excluded, it’s important to be clear about what your home insurance policy does cover.
Your standard homeowners insurance policy usually protects your home structure and walls, roof, etc. against fires, hail, wind, theft, vandalism, lightning, and most floods, as well as “Acts of God.”
It also typically protects your personal belongings like clothing, furniture, home electronics like TVs, computers, and kitchen appliances.
Homeowners policies cover personal liability, too, which means if someone is injured at your home during activities not tied to business, such as entertaining friends or family, cooking, or other accidents.
Your policy even typically covers temporary living expenses and accommodations if a covered loss makes your home temporarily uninhabitable.
Pretty good, right? A standard homeowners policy provides pretty comprehensive protection. But notice the key words: personal belongings and personal liability. Personal. When it comes to commercial activity, particularly when you make and sell things, that personal protection ends.
A standard policy will cover your home as your residence, but as soon as you start doing business from home, you’ve changed the risk equation.
“Commercial” to your insurer, and you have a business. Personal business to you, a place to make and sell things you enjoy.
It’s not a bad thing. You just need the right coverage.
Home Insurance Exclusions
Homeowner’s insurance, even high limits, doesn’t cover most aspects of your Etsy business.
Here’s what you need to know about common exclusions in a homeowner’s policy when it comes to business activity.
Business Property
Your inventory of materials, finished product, equipment, tools, or other stock held in your home or workspace are business property, not personal property, and will be excluded by your home policy beyond typically a few thousand dollars of coverage, often less.
Equipment and Tools
Tools and equipment, even if used to make things to sell, are business assets and typically excluded by standard home policies beyond minimal token amounts. Equipment can include any of the following:
• Kiln
• Sewing or embroidery machine
• Inkjet printer
• Label printer
• Computers, laptops, tablets
• Packaging tools like tape guns, ribbon cutters
Shipping & Storage
Home insurance policies specifically exclude off-site property. Items stored at a warehouse, a craft fair, or any other location outside your home are all excluded.
Your home office isn’t safe, either. If you store sensitive customer or credit card information, or equipment used to make and ship things for sale, those are also excluded.
If you use your laptop, computer, or even smartphone primarily for your Etsy business, those are all excluded. Equipment used for business, not personal use, are all excluded from a basic home policy.
Customers & Liability
Homeowner’s policies won’t cover injuries or accidents that occur while someone is on your property for business, such as to pick up an order.
If a product you sold or shipped is the cause of an injury, your home policy won’t cover it either. Product liability is a key exclusion.
Business Income
Loss of business income, such as if a covered loss like a fire or flood shuts down your business and you have to temporarily close your Etsy shop, are also excluded.
Most home policies exclude business activity beyond a few token dollars. They’re designed to cover your home as a residence, not when you mix that use with a home-based business.
It Doesn’t Matter If You “Only Sell a Few Items…”
“But I’m just a hobbyist. I only sell a few things. I’m not a real business.”
It’s what every Etsy seller tells themselves until their shop suddenly takes off.
Etsy and any online marketplace are designed to scale. One viral Facebook post. A great Etsy Ads campaign.
The issue is hobbies are for fun. When you start making and selling things to the public, no matter how small or local, you’re in business. Businesses, even tiny home-based businesses, have legal exposure.
You might be a one-person candle maker operating out of the garage or a weekend jewelry maker working your craft at the kitchen table on off hours, but if your candles cause a fire or your jewelry damages a customer’s skin, you can be held liable.
I talked to a seller once who made all-natural hand soaps, just a few ingredients and essential oils, simple stuff.
Never in her mind, she was in business. She didn’t keep detailed records, no product liability insurance, her home policy would have none of it. One customer claimed the soaps gave her a skin reaction. The customer mentioned litigation. The seller reached for her homeowner’s insurance and learned quickly just how little it had to do with liability. She paid for everything out of pocket.
That’s when she learned exactly what product liability was and just how crucial it is once you open that Etsy shop and start selling to the public. That’s why all Etsy store owners should contact USA Business Insurance to explore their coverage options.
