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From what I have already learned, you can make items at home on a hobby basis without making the house insurance policy invalid. I am in the process of starting up a furnishings business, although so far I have not registered the business etc and I have not sold anything yet. I want to buy and use a laser engraving machine (the machine would cost about £14,000 to buy) at home in my garage because it would save me having to pay out lots of money on renting out an industrial unit. What I need to know is what exactly are you allowed to do on a hobby basis without affecting the insurance cover. The questions I have are: (1) Am I allowed to develop some items which I might sell at a later date when I finally officially start up the business? (2) Can you make and sell anything as long as it is not under a company name? (3) Are you not allowed to make and sell a single item under a company name without making the insurance invalid.
One final question. (4) The laser engraving machine would be quite a large and expensive machine. If I made an insurance claim because for instance the machine caused a fire that damaged other items within the property, would the insurance company question the fact that I was saying I was using it on just a hobby basis. In other words does the size and cost of equipment used at home matter at all?
What if I made a whole load of items and then stored them somewhere else, for instance in a storage unit. Then at a later date I started the business and sold them all. Would that be OK?

3 Thoughts on What are the insurance/tax implications for making and selling items from home?
  1. Reply
    robodude1
    June 26, 2011 at 3:52 am

    You appear to be in the UK. I have no idea about insurance issues with UK companies. My insurance policy has no clause that makes the insurance invalid if I have a home business.

    Here in the states many people run businesses out of the home. If you are going to use equipment in the home business you probably should insure it and any damage it might cause with a business policy drawn on another company.

    Fred

  2. Reply
    mbrcatz17
    June 26, 2011 at 4:44 am

    If you make items to sell, your homeowners policy won’t cover it. It does NOT cover product liability, no way, no how, it just doesn’t. Anyone who’s told you something different, is wrong.

    If someone sues you because a chair breaks when they sit on it, it’s not going to cover it.

    Hobbies are something you don’t make money at. If you sell something, it’s not a hobby – it’s a business.

    You can be sued for your products. If you make one, or 100, you can be sued.

    Your homeowners policy doesn’t cover business enterprises – which means, things you make to sell. Period. Whether you do it under your personal name or business name, doesn’t matter.

    It doesn’t invalidate homeowners policies, it’s just specifically EXCLUDED from coverage.

    Regarding the laser machine. If it’s not a typical home furnishing, you’re going to have a hard time having it covered. If it’s something typically used in manufacturing, you’re going to have a really hard time explaining the fire. There’s a REASON manufacturing costs more to insure – the risks are higher.

    If you have INVENTORY somewhere, it’s not covered under your homeowners policy. If you make it now, and sell it later . . . and someone sues you over it, it’s still not covered under your homeowners policy. You’ll be paying the legal fees out of pocket. AND any judgements.

  3. Reply
    STEPHANIE S
    June 26, 2011 at 4:44 am

    I don’t know about the UK, but in the US.. your homeowners policy covers just that.. your home…. not your business. If you use your laser thingy to build something on a bicycle and it doesn’t work right and someone gets hurt on their bike because of what you did with your laser thingy…. no coverage.

    There is no coverage for product liability under your home, and you are using that laser thingy to make or change or do whatever.. to a product.

    If you have customers at your home for the purpose of buying something that you have made with the laser thing, and they get hurt… your liability coverage does not extend to them… they are there for your business.

    If you want to use your garage and stockpile inventory for when you OPEN your business, and you have no sales, customers.. then you should be cool…. you might want to add the laser thingy to your policy as a special endorsed piece of equipment.. you might have a limitation of coverage.

    But you won’t invalidate your homeowners coverage.. you are just limiting it, like it has always been.. to cover your home… only…. not a business.

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