Insurance company refuses to cover me since I have a wood shop

[Matt Uchida]

I tried to find another threat that addressed this specifically but I couldn't so sorry if this is a repeat

So I have State Farm and I moved to a new house. It has a good size space where I can finally have a real woodshed. It is about 14'x14' and is attached to the garage and house. I also have a small business LLC to make everything legit when I sell something. I don't make much, maybe all of $2,000 last year in sales. So I asked about a separate policy for the business side. The local agent called me back later saying the underwriter thinks the fire risk is too great and now are saying they won't give me a business policy or a home policy! So I have to give up my hobby now?!

So my question for all of you here is if anyone recommends any insurance company that didn't have a problem finding insurance for my home and shop? People all over the place have home workshops, I cannot believe they are just telling me it is too risky. The local agent said she would try to get a second opinion but if not I am in a bind. I told her I could buy a bunch of fire extinguishers if necessary but we will see what happens. Suggestions are greatly appreciated.

[Steve Eure]

Matt, I would be looking for a different insurance company. After Katrina hit the Gulf coast, State Farm lost all credibility with me. Refusing to pay all the claims for the insured. I also have had 2 bad experiences with them over the last 30 years. They don't mind taking your money, but you have a heck of a time with a claim. The last time I ended up having to get our state's insurance commissioner involved. The issue was settled almost immediately then. I wouldn't recommend that company to anyone.

[Nicholas Lawrence]

Shop around. There are a lot of insurance companies out there beyond the ones who advertise all the time. Try calling a local independent agent, who should be able to get you in touch with multiple insurers.

[Kevin Jenness]

Insurance can be a real pain. When I went back to self employment my homeowner's carrier dropped me. I talked to half a dozen independent agents before I found affordable coverage for my business (Merchant's) and homeowner's (Travellers). Few if any homeowner's policies will cover any losses related to a home woodshop business. You may find it cheaper to do woodworking strictly as a hobby than to insure it as a business. Cast your net widely, and good luck.

[Dave Carey]

Agree re the disappointment with State Farm. We've had home, car and liability insurance with them for almost 50 years, but they refused to insure a new house which is partially in a .02% chance flood plain. Would have understood a "we'll insure you but your rates will increase" response but got a "we won't insure you." Brother-in-law in Mississippi got a runaround from them after Katrina as well until he proved that he had the "good luck" that the roof had caved in! That meant it wasn't a flood problem and his homeowner's insurance kicked in.

[Jim Becker]

I agree with the sentiment that you need to seek out a new carrier and also will recommend an independent agent as well as talking to the insurance folks at AAA if you are a member and they write insurance in your state.

[Malcolm Schweizer]

Try using an independent that underwrites for Lloyd's of London. (which many do) I had problems finding an insurer for my home because it's 180 years old, but I got an independent who I found out actually used to live in the house!!! She was happy to write a policy. Also, I recommend NOT using the words "workshop" or "woodshop." Use the word "hobby room" instead. Same thing, but much less menacing sounding. Let them ask for more details if they want, but otherwise, it's just a hobby room. I was very adamant during my home appraisal that the appraiser use the term "hobby room." He kept saying, "So this is for woodworking?" I said, "It's for hobbies- painting, sewing... all kinds of hobbies." He nodded, winked, and wrote it down as a hobby room. It would help if you can have the insurance appraisal done before any machinery is moved in.

[bruce buren]

I had a separate policy to cover fire, etc on my basement shop. It was 500/yr and had a 40000 to cover tools, materials, projects. My house insurance never went up and agent said if something would happen the house insurance company would most likely sue the fire insurance company but either way I was covered on both house and shop. The policy is from UFG United fire group

[glenn bradley]

Yep, shop around. The variation in coverage and what policies a company will write are pretty surprising to the uninitiated. I learned a lot by just using the phone.

[Sam Murdoch]

Hanover is a company that was pretty liberal with me not just with the shop but also for an out building that had a porch without railings. We have been insured by various companies on this property since 1987 and a few years ago made some changes that required an insurance review and the whole thing nearly collapsed. I would have truly been in dire straights had they refused me the shop. The porch railing thing was just another reason for them to argue. We use this building and porch for storing large items - a dinghy, machinery etc. All of a sudden someone decided that we weren't compliant. Even when I suggested that I would build removable railings they were adamant. Dumped that company and switched to Hanover. All good.

Don't know if they are a nation wide company or where you are located so my recommendation may be a sinker. I offer it nonetheless. A good local underwriter can be an essential friend in this process.

[Kevin Jenness]

I would be cautious about following Malcolm's advice on calling the workshop a "hobby room" in this case as the OP is in fact operating a business. If you misrepresent that and have a loss caused by the business you may find yourself out of luck.

[Don Parker]

What follows is not legal advice, and I am not representing anyone on this forum (it is important that I make that clear, because I am a lawyer):

1. Yes, on the insurance, shop around. An independent agent is really useful, because if all else fails, that agent can help you buy insurance in the surplus lines market. There will be a company that will pick you up, eventually.

2. Be honest on the application. You can jeopardize your coverage by not being straight with them about what is there in your home and what you do there.

3. You should not call a business a hobby, and I say this because of a completely different problem: Taxes. If you tell the IRS it is a business, and you tell your insurance company it is a hobby, that can cause you problems. Consistently call it one or the other. Don't call it different things to different entities that have a legitimate reason to want to know which one it is.

[John C Cox]

This is where a LOCAL independent insurance agent is your friend. They generally deal with lots of companies and will know which one is the right match for your specific situation.

The State Farm (Allstate and Prudential are both in this class) sort of places specialize in ultra low risk (both property and customer) for a very low price. This is their business model... Its not wrong - it is just what it is..

You have to understand that with this sort of big national discount price agency - if you don't fit their risk profile - you are out because of their business model.... BUT - the local multi-company rep will have access to exactly what you need.

[Mike Wilkins]

Your problem is that you informed them that you use a part of your home as a place of business; homeowners policies do not cover any part of the property that is used for business/money-making purposes. Not a problem with hobby shops, like the folks on this forum have. Once they find out about the business purposes, their red flags go up. It is not the insurance company's fault; just what they were told. The underwriting department has to take these things into account in deciding to issue a policy. Especially since your shop is attached to the primary residence.
Since I work in insurance claims this issue comes up from time to time.

[Wayne Cannon]

I suspect that the business use is the sticking point.

I have State Farm (they surprised me by being less expensive than my independent Farmers agent could do -- though I was very happy with him for many years) with a 30' x 30' shop which they've seen many times on their regular inspections of the place. I've told them that I want to be sure that students, friends, etc., that come over and use the shop -- including teenagers I've paid to help install electrical, lighting, & insulation -- are covered. I do have an umbrella policy (it's cheap, though).

A lot of insurers are getting really picky in order to get out of the market around here (we're on a hillside 1.5 hr north of San Francisco, and they are worried that something like the Oakland Hills fire of last decade could happen here). Allstate cancelled my neighbor's policy, and gave him really nit-picky reasons. He was very happy re-insuring with USAA.