Warning to instructors, regarding your insurance coverage

[Flying Crane]

hi everyone,

I wanted to pass along a heads-up to all instructors who are teaching out of their home/garage/back yard.

If you are relying on your homeowners insurance to provide liability coverage in the case that your student is injured, you could be making a big and costly mistake.

I am looking into doing this, and contacted my homeowners insurance provider to see about adding business liability. I was told that my homeowners coverage will NOT cover liability from teaching martial arts. I was also told that if i engage in teaching from my home without proper business liability insurance, even if I teach for free so it is not a business and is just an activity that I and some friends engage in, my provider will cancel my homeowners policy and leave me without coverage.

So if you are relying on your homeowners coverage for liability protection, if you submit a claim, your provider may refuse to cover the claim and then may also cancel your homeowners coverage, leaving you in a financial mess. I strongly recommend you contact your insurance provider and make sure you understand the limits of your coverage. This is not something you want to find out when it is too late to do something about it.

Be smart. Protect yourself. If you are teaching, make sure you have appropriate insurance coverage.

 

[FriedRice]

You shouldn't even hire uninsured handyman to work around the house as they can sue you if they get hurt. You've been playing with fire.

 

[Gerry Seymour]

It's not terribly expensive to get MA-oriented sports insurance for your program. Base cost (10 student minimum) is a bit under $500, I think. About $5 per student if you attract more.

 

[Flying Crane]

It's not terribly expensive to get MA-oriented sports insurance for your program. Base cost (10 student minimum) is a bit under $500, I think. About $5 per student if you attract more.

As it turns out, it becomes a bit more complicated when you are doing it at your home. You end up with both private homeowners as well as business/commercial, and that’s where it becomes a bit tangled. If you get business or general liability and teach away from your home, that can be simpler and less costly if you have an alternate space already available.

I just got off the phone with my agent, it comes down to the fact that they simply do not want to cover me for this. It is clear that this is not their area of specialty, so I will be shopping this around to see if there are better options.

 

[JowGaWolf]

I would get an LLC for liability protection. This way they can only sue the business. Then get insurance for the business to cover the students. Without the LLC a person can sue you without limits, basically you could lose your home or car without an LLC.

 

[Flying Crane]

I would get an LLC for liability protection. This way they can only sue the business. Then get insurance for the business to cover the students. Without the LLC a person can sue you without limits, basically you could lose your home or car without an LLC.

Sure, good suggestions but those are cleaner situations if you are keeping a separate location for the business.

The complication is when you are teaching out of your house, and your homeowners insurance is in the mix.

 

[Gerry Seymour]

Sure, good suggestions but those are cleaner situations if you are keeping a separate location for the business.

The complication is when you are teaching out of your house, and your homeowners insurance is in the mix.

You can reduce the risk a bit, as I understand it (I am not a lawyer, etc.), if you rent the space to your LLC for a nominal fee. Use a rental agreement that includes standard risk/liability clauses. You'll have to declare the rent as personal income, but if you rent it out cheap, it doesn't matter much.

 

[Flying Crane]

You can reduce the risk a bit, as I understand it (I am not a lawyer, etc.), if you rent the space to your LLC for a nominal fee. Use a rental agreement that includes standard risk/liability clauses. You'll have to declare the rent as personal income, but if you rent it out cheap, it doesn't matter much.

That might work technically, but my homeowners provider has been very clear about it: no teaching without a complex re-do on the insurance, or else they will cancel my coverage.

I’m going to see if I can find another provider who is more willing to work out a solution.

 

[Gerry Seymour]

That might work technically, but my homeowners provider has been very clear about it: no teaching without a complex re-do on the insurance, or else they will cancel my coverage.

I’m going to see if I can find another provider who is more willing to work out a solution.

Oh, you definitely need coverage for the business side, in any case. Are they saying you have to change your homeowners policy, as well? If so, I'm not at all certain there's a legal reason for that pressure (I was never licensed in poperty/casualty, though, so another caveat).

 

[Flying Crane]

Oh, you definitely need coverage for the business side, in any case. Are they saying you have to change your homeowners policy, as well? If so, I'm not at all certain there's a legal reason for that pressure (I was never licensed in poperty/casualty, though, so another caveat).

Yes, I need a new homeowners carrier. My current carrier is willing to re-write my insurance but it will become a business policy for an additional $1500 above what I pay now, and will leave my personal liability exposed, so we then need to come up with an additional fix for that for additional cost. They will not accept just adding a general liability on top of the current policy. If I teach at the house, they insist on a full business policy to cover the building as well as the liability of teaching.

They have admitted that they really just don’t want to write the insurance for this, it just isn’t their specialty. So I’ll be talking with some other providers.

 

[Gerry Seymour]

Yes, I need a new homeowners carrier. My current carrier is willing to re-write my insurance but it will become a business policy for an additional $1500 above what I pay now, and will leave my personal liability exposed, so we then need to come up with an additional fix for that for additional cost. They will not accept just adding a general liability on top of the current policy. If I teach at the house, they insist on a full business policy to cover the building as well as the liability of teaching.

They have admitted that they really just don’t want to write the insurance for this, it just isn’t their specialty. So I’ll be talking with some other providers.

Yeah, definitely do. And let us know what you find out.

 

[JR 137]

You can reduce the risk a bit, as I understand it (I am not a lawyer, etc.), if you rent the space to your LLC for a nominal fee. Use a rental agreement that includes standard risk/liability clauses. You'll have to declare the rent as personal income, but if you rent it out cheap, it doesn't matter much.

Once he starts “renting space to his LLC” I believe his house isn’t purely residential anymore, thereby negating/whatevering his residential homeowner’s policy?

Listen to the insurance broker. He/she knows the policy and loopholes. It’s his/her job to know it. And if they’re telling you they won’t pay out due to clauses, they’re not going to pay.

 

[pdg]

It may well be a different situation over there, so this comment is worth exactly what it costs you

If I dedicate a room in my house for business purposes I can exclude that portion from any personal home insurance entirely, and because of how taxation works here I would no longer pay residential housing tax on it either (it would technically be liable for business rates, but they don't apply until a certain value threshold, so it'd be exempt anyway).

My home insurance company wouldn't care, because they wouldn't be expected to cover it at all anyway (except for the fabric of the building, but that wouldn't be affected). The only thing that may be taken into consideration when it comes to premium calculation is possible increased risk of theft or damage if any clients are given access to the private parts of my house (for entry to business space, use of other facilities).

Everything then (contents if required, public and personal liability, professional indemnity, etc.) would all be under the business insurance as an entirely separate entity.

But, I've seen stuff like 'zoning' on TV () which we don't really have either. If I want to open a shop in my kitchen I can just do it - I wouldn't be compelled to really do anything or tell anyone (except for restricted activities) and any insurance and the like is optional not compulsory - but it'd be silly not to have any...

 

[Gerry Seymour]

Once he starts “renting space to his LLC” I believe his house isn’t purely residential anymore, thereby negating/whatevering his residential homeowner’s policy?

Listen to the insurance broker. He/she knows the policy and loopholes. It’s his/her job to know it. And if they’re telling you they won’t pay out due to clauses, they’re not going to pay.

Yes, that's a consideration. I'm not familiar with limitations on rental property within a residence and how P&C policies usually address that. I know they wouldn't cover the liability for the renter (the MA business), but a general liability business policy isn't that expensive. I can't see why a portion of the property being a rental (or used for business purposes) would change how his homeowner's policy covers the structure in other terms. But, again, I was never licensed in P&C, so my knowledge there isn't what it is for other areas of insurance.

 

[Gerry Seymour]

It may well be a different situation over there, so this comment is worth exactly what it costs you

If I dedicate a room in my house for business purposes I can exclude that portion from any personal home insurance entirely, and because of how taxation works here I would no longer pay residential housing tax on it either (it would technically be liable for business rates, but they don't apply until a certain value threshold, so it'd be exempt anyway).

My home insurance company wouldn't care, because they wouldn't be expected to cover it at all anyway (except for the fabric of the building, but that wouldn't be affected). The only thing that may be taken into consideration when it comes to premium calculation is possible increased risk of theft or damage if any clients are given access to the private parts of my house (for entry to business space, use of other facilities).

Everything then (contents if required, public and personal liability, professional indemnity, etc.) would all be under the business insurance as an entirely separate entity.

But, I've seen stuff like 'zoning' on TV () which we don't really have either. If I want to open a shop in my kitchen I can just do it - I wouldn't be compelled to really do anything or tell anyone (except for restricted activities) and any insurance and the like is optional not compulsory - but it'd be silly not to have any...

Zoning would be an issue in some places, though most areas aren't zoned so tightly that you can't run a business there. What you describe with the insurance is similar to what I would expect in the US.

 

[Flying Crane]

Part of the house is an in-law unit that we use for rental income. That is specifically covered as part of my homeowners insurance and it isn’t difficult nor especially expensive. So some things are not a big deal.

Martial arts instruction is viewed as a high-risk activity and my carrier seems to have little or no experience with it. They are operating on a stereotypical view that when people get together to train martial arts, they beat the living snot out of each other. So they are afraid of injury liability and really don’t actually want to write the insurance.

This is my point: make sure you understand the limits of your coverage. I suspect it can vary widely from carrier to carrier. A carrier who has greater understanding and experience with martial arts may be easier to work with.

 

[Flying Crane]

I had a long talk yesterday with an independent insurance agent, this agent is not connected with my current provider.

He has completely confirmed everything that I was being told by my current provider.

It seems that homeowners providers will not cover martial arts instruction done at the home. The insurance would need to be written as a business policy, which, IF you can get a provider to agree to do that (which is questionable) is going to be a good bit more expensive. And that creates a bunch of complications in the separation of business vs. personal liability and such, so it seems they are reluctant to do it. In the end, the agent told me to forget about teaching at home. If I want to teach, I need to do so in some other space, either open my own space or work through a gym or other martial arts school, perhaps a community rec center.

It’s a bummer because I was really hoping to do something small and reasonably private, and this immediately makes it bigger than I intended.

So, all the folks out there teaching in their garages, unless their insurance has been written as a business policy, they are teaching without coverage.

 

[Gerry Seymour]

I had a long talk yesterday with an independent insurance agent, this agent is not connected with my current provider.

He has completely confirmed everything that I was being told by my current provider.

It seems that homeowners providers will not cover martial arts instruction done at the home. The insurance would need to be written as a business policy, which, IF you can get a provider to agree to do that (which is questionable) is going to be a good bit more expensive. And that creates a bunch of complications in the separation of business vs. personal liability and such, so it seems they are reluctant to do it. In the end, the agent told me to forget about teaching at home. If I want to teach, I need to do so in some other space, either open my own space or work through a gym or other martial arts school, perhaps a community rec center.

It’s a bummer because I was really hoping to do something small and reasonably private, and this immediately makes it bigger than I intended.

So, all the folks out there teaching in their garages, unless their insurance has been written as a business policy, they are teaching without coverage.

You know, something occurs to me. NY has significantly different insurance laws than other states. That might account for the different expectation I had - or I might just be entirely wrong about what would happen elsewhere.

I wouldn't ever expect homeowners' policies anywhere to cover the MA activity (or any business activity or equipment), but would expect the home to be otherwise covered (with exclusionary clauses, which probably already exist in the policy). Then a business liability policy for sports activities (reasonably easy to get in most states), and probably some inexpensive property insurance would be relatively cheap. But in NY, I should have expected different rules (most life insurance companies have entirely different policies for NY, compared to the other 49 states). I'm going to reach out to find out if I'm horribly misinformed about that, just so I'll know for future use.

Out of curiosity, do you know if the same issue would exist if you had a separate building on the same premises?

 

[Xue Sheng]

You know, something occurs to me. NY has significantly different insurance laws than other states. That might account for the different expectation I had - or I might just be entirely wrong about what would happen elsewhere.

I wouldn't ever expect homeowners' policies anywhere to cover the MA activity (or any business activity or equipment), but would expect the home to be otherwise covered (with exclusionary clauses, which probably already exist in the policy). Then a business liability policy for sports activities (reasonably easy to get in most states), and probably some inexpensive property insurance would be relatively cheap. But in NY, I should have expected different rules (most life insurance companies have entirely different policies for NY, compared to the other 49 states). I'm going to reach out to find out if I'm horribly misinformed about that, just so I'll know for future use.

Out of curiosity, do you know if the same issue would exist if you had a separate building on the same premises?

He is not in NY....I am though and any of my teaching has either been at my Shifu's place or at my Wife's office and the insurance coverage for my wife's office covered what I was teaching...but then hers office is a medical office, it may be different for the average office

 

[Flying Crane]

You know, something occurs to me. NY has significantly different insurance laws than other states. That might account for the different expectation I had - or I might just be entirely wrong about what would happen elsewhere.

I wouldn't ever expect homeowners' policies anywhere to cover the MA activity (or any business activity or equipment), but would expect the home to be otherwise covered (with exclusionary clauses, which probably already exist in the policy). Then a business liability policy for sports activities (reasonably easy to get in most states), and probably some inexpensive property insurance would be relatively cheap. But in NY, I should have expected different rules (most life insurance companies have entirely different policies for NY, compared to the other 49 states). I'm going to reach out to find out if I'm horribly misinformed about that, just so I'll know for future use.

Out of curiosity, do you know if the same issue would exist if you had a separate building on the same premises?

Good questions, and I do not know the answers.
I also assumed I could just get a separate business liability policy, but the homeowners providers are stating a very clear “no way!”