Insurance Facts

[Roger Bullock]

First off let me say that I am NOT an insurance salesman! I am a catastrophe insurance adjuster. I am also just like most of you, a woodworker. So with that said here are a few things you might not know about your tools and some homeowners insurance policies.

Some policies have maximum payout limits on tools, machinery, lawn tractors, and guns. ....Do you have enough to cover a total loss, many don't and don't know it until after a loss.

Could you right now, without going into your shop write down each item, date of purchase, and cost of every item you own. Don't forget the small things either even if you don't use them much anymore, they can add up to several hundred dollars very quickly.

Do you sell a few pens, woodcrafts, or furniture out of your shop? If you do, it is a business and those items, materials to produce, and tools used most likely are not covered by a homeowners policy, they need a business policy.

What do I do when it comes to keeping track of what is in my shop (and house for that matter), at least once a year I get out my video camera and video everything. I go slow taking photos of machinery (including serial and model numbers) of the larger equipment. Open every drawer and cabinet to record even the smallest items, those are the most overlooked items when you are making a list after a loss. Then I store the video is a safe place away from my home.

Liability insurance is another matter which I will not get into here but you should consider.

After a loss I often here "My insurance didn't pay enough to cover my loss." when what they should have said is "I didn't buy enough coverage to cover my loss." Today is a good time to inventory your property and talk to your agent.

[Rod Sheridan]

Excellent reminder Roger.

My insurance agent does have a list of all my shop machinery, down to the bench grinder level.

He also has a list of cutting tools (blades, planes, chisels etc), and a lump sum value for other hand tools.

Same for garage with vintage bikes and workshop equipment there.

It's absolutely amazing how much money is in my basement and garage.

Regards, Rod.

[Stephen Massman]

So how do you get a price quote without alerting your agent that you have a side business with ~5k-7k of tools.

[Rod Sheridan]

So how do you get a price quote without alerting your agent that you have a side business with ~5k-7k of tools.

Hi Stephen, actually it took a bit of discussion to convince her that I didn't have a side business as I had $25K in woodworking machinery and another $7K in woodworking hand tools.

The initial quote was 10% of insured value per year (business), which was $3,200.

After some discussions and a visit to my house it dropped to a couple of hundred per year, as it was simply personal ownersip and use.

If you are a single user, even for a business, you should be able to negotiate a rate based upon the ease of theft. If you aren't leaving your stuff in a van, or on a poorly secured jobsite, you should be able to obtain a reasonable rate for replacement value.

If you are running a business, you have business licensing and insurance concerns, which you should address for your personal protection.

Regards, Rod.

[Roger Bullock]

Stephen, think of it this way. Is it better to keep secrets and risk losing everything. Or be up front with your agent and have the coverage you need. That is a decision you have to make yourself. An adjuster can only recommend payments for what you purchased (policy) not what you should have purchased.

[Stephen Massman]

I run a side business of selling my woodturned items. I go to art shows and sell at galleries. So not a big business like a contractor. I only sell around 7K a year and most profit goes right back into the business. I run my business as a self sustained and dont touch family finances. So the cost of insurance would come out of my business. Not a big deal but it has an affect.

I have a secured shop that is excavated under my garage with steel doors. No windows.

I am mainly worried that if I start asking for a price quote that even if I don't increase the coverage, my insurance will go up. It is not that I am trying to keep secrets, but more worried that my rates will go up once I start the discussion.

[Chris Friesen]

I am mainly worried that if I start asking for a price quote that even if I don't increase the coverage, my insurance will go up. It is not that I am trying to keep secrets, but more worried that my rates will go up once I start the discussion.

The thing is, right now your shop likely isn't covered because it's a business.

I asked my insurance agent about this, and they basically said that all my tools are covered as long as they're strictly personal, but the instant I sell anything for *any* amount of money I need a separate policy for the shop.

[Stephen Massman]

Great

thanks



The thing is, right now your shop likely isn't covered because it's a business.

I asked my insurance agent about this, and they basically said that all my tools are covered as long as they're strictly personal, but the instant I sell anything for *any* amount of money I need a separate policy for the shop.

[Pat Germain]

Also consider different insurance companies have different policies. Some companies might require a rider to make sure the shop is covered. I've talked to my agent many times and he assures me I do not require a rider. (Hope he's right.)

Also, there are many options for insuring your shop. You can get a typical policy which will pro-rate your tools based on age. Or, for little or noe money extra, you can get a "full replacement" policy which will cover the cost of buying new tools (after paying the deductable).

[Victor Robinson]

Thanks for the reminder Roger.

Particularly about keeping track of the little things that really do add up. Those of us who have been burglarized before understand how disorienting it can be to come home to a home/shop in complete disarray. How do you know what you've lost aside from the large items?

My other expensive hobby is photography. Our home was burglarized a year and a half ago and the crooks made out with a fair amount of my gear. Unfortunately, while I had larger items catalogued like camera bodies and lenses, it was the little things I didn't realize I was missing that actually added up to a few grand. Actually to this day I am learning the lessons of not having better documentation as I'll be looking for a particular piece of gear only to wonder whether I've simply misplaced it or whether it was taken in the burg.

[Roger Bullock]

I understand Victor. I've see firsthand time and time again how hard it is for someone to list all their lost items. Try this exercise. List from memory every item and its cost in the third drawer of your _____________. Then go that drawer and see how much you missed. Insurance companies are counting on you to miss a lot.

Part of your duties after a loss is to list each and every item including the cost of that item. Not listing all your items is like not seeing photos of someone's work on this site. Don't see photos...didn't happen. Insurance claim, not listed......not payment.

[John Piwaron]

I understand the original posters POV, I think.

Having a lot of tools and then asking the question "Well, I've got all this stuff, am I insured?" opens the door to the agent looking at it and seeing a shop in which things to sell are made. That may not be the case at all, but once a large enough number of professional looking tools are assembled together, that seems to be what a lot of people think. I've experienced that more than once when service people (plumber, furnance guy, etc.) visit. Yet that's not the case at all. It's just an expensive hobby. I could have spent the money on a lot of other things, I just happened to spend it on things that look like a business, but isn't.

That's the crux of the matter. That the insurance agent and company believes you. I think it's that part of the process the original poster wants to avoid. Just get a cost for homeowners insurance that allows for replacement of his hobby tools, however that may have to be written (riders and such) without engaging in the "is it a or is it not a" business dance.

[Harry Hagan]

I've talked to my agent many times and he assures me I do not require a rider. (Hope he's right.)


Don't hope he's right. If your policy doesn't state that a rider isn't necessary, have your agent provide you with a notarized letter stating that one isn't required.

[Don Jarvie]

Here's what I gathered from my Agent last week regarding this issue.

If you have a separate building for your shop (detached garage) you should have coverage for that building and any other outbuilding. You want to find out how much it would cost to rebuild the building should you have a fire or disaster.

The tools, etc are covered under the Personal Property portion of your policy.

Here is Mass, if they figure out you have a business I get 10% of the insured cost of the building (10% of 30,000 or 3,000) and no coverage for the tools. The tools would count under the 10%. I would need a business policy.

Hope this info helps

[Tom Godley]

Roger - Good Post!

We had a fire when I was growing up and by some miracle a friend of my father had recommended just a few months before that he take pictures of everything in the house and place the pictures in a safe deposit box. We took pictures of everything -- from the china and silver service down to the number of towels in the closets. It was an unbelievable help -- many of the rooms were completely destroyed. Today with digital cameras and stick drives there is no excuse not to have them. When you start adding everything up -- the numbers become BIG.


I am also surprised -- many do not have the proper insurance. Too many are concerned about having a low deductible and not looking at what is actually covered. Having enough liability and the correct property coverage is extremely important if you ever need it.

I often talk to my agents regarding what is and is not covered -- this is how you learn. You are not required to buy it -- but at least you know what you have. Also, insurance companies are all a little different regarding what and how they cover things.

[Roger Bullock]

How many people out there have another hobby like boating, motorcycles, 4 wheelers, campers, or cars? I'd bet that one of the first things you would do after the purchase of one of these items is to get the proper insurance. But since woodworking expenses come slowly over time, most don't think about or even know if they have insurance to cover them.

With say a boat or motorcycle, your replacement insurance will cover book value (based on age). Replacement cost of tools is not based on age depreciated value, most times in is called like, kind, and quantity. Example; purchased a XYZ 3 hp table saw 3 years ago for $1476.00 (including tax and shipping). Today's replacement; don't make the XYZ but the equivalent is the XYZ super saw (the like, kind, and quantity) at $1798.00. Your payment could be the full amount of the new saw.

Purchased a ABC boat 3 years ago for $12,500. Today's book value for a three year old ABC is $8.900. You would get the current value only.

Point is to have these discussions with your agent because all companies have different policies. Most times, adding additional coverage to a policy is a lot less costly than most people think. Just wanted to let most of you know that most woodworkers are under insured.

[John Pratt]

This may go off topic slightly towards the I.R.S. but....

If I do not run a business out of my shop and I never sell anything produced therein it is a hobby. But if I produce furniture or other woodworking items and then donate them to various charities, family, businesses, etc..., don't those items have an intrinsic value? If I can write off those donations to charities and they have value, is my shop now a business and now requires a different insurance rider? Hmmmmmm.

[Pat Germain]

Don't hope he's right. If your policy doesn't state that a rider isn't necessary, have your agent provide you with a notarized letter stating that one isn't required.

Well, that's not going to happen. My only realy option would be to hire a lawyer to review my policy and translate it for me. And that's not going to happen either. :)

My agent is a very good friend of mine and we were friends long before he became in insurance agent. I know it sounds very old fashioned, but I do trust him.

[Brian Elfert]

My insurance agent actually came out to my house to verify I had enough coverage for the structure. Of course, he makes more of a commission if I pay more. I ended up needing to increase my coverage a little bit.

I'm not real convinced it would cost as much as he says to rebuild my house. My house is under 10 years old so code changes are minimal.