Hobby Woodworking Shop - Casualty Insurance?

[Marty Tippin]

The recent thread about the cost of the tools in your shop got me to thinking about whether my homeowner's insurance policy adequately covers all the "stuff" that's out in my wood shop. I'm just a hobbyist - I don't sell anything (yet), so I'm not talking about liability insurance or any kind of business insurance that the professionals here have - but given that I've got a 40x40 building that cost $30k to build and upwards of $20k in tools inside (don't tell my wife), should I be concerned that my homeowner's insurance policy won't cover me adequately in case of a fire or theft? At present, I only have the "vanilla" homeowners policy that I had before I started down the woodworking rabbit hole...

Are there special riders or additional policy endorsements that I should be looking into? Given the specialty nature of the tools and equipment, how would you ever justify the amount of a claim in case of a total loss?

I suppose a call to my agent would answer a lot of these questions, but I hate calling a guy who sells widgets and asking him whether I need to buy more widgets... I'd much rather have a good idea what I do and don't need before I pick up the phone...

[russell dietrich]

Marty
I asked my home-owners ins agent this question in Nov of 2014. (I have checked with him 3 times over the past 3 years.)
The question was "As a hobbiest that ocassionally sells woodwork, will my insurance cover my shop and my tools?"
His reply : It will cover the structure and the tools, it will not cover inventory contained within. (Inventory being anything made to sell such as bowls, etc) and wood use to make them. This is in Louisiana, I do not know about other states. My insurance agent has always been helpful and honest with me. I would ask my agent any questions like this as it may vary from one company to another.
Russell

[Ryan Mooney]

I did an inventory and took it in and talked to my agent. They pulled up my policy and went though it wil me. It was all under the coverage caps.

Your coverage is likely different since it seems every policy is unique so you'll have to check the details on your policy.

Having the detailed inventory would be critical to getting a claim honored in any event.

[Paul Kinneberg]

I have found the same thing my homeowners will cover the loss. Having said that I keep an inventory and once a year I take a video of everything in my shop including inside cabinets and drawers so if I ever need to I can come up with a good accounting of what was there I can. My spreadsheet also shows what I paid for tools so that my family will have an idea of what they have once i'm gone. Hopefully many years from now :)

[Rod Sheridan]

My insurance company has a list, with model, serial numbers and copies of invoices for my larger stuff, plus another $10K listed as personal hand tools.

Regards, Rod.

[George Bokros]

- but given that I've got a 40x40 building that cost $30k .

Your homeowners policy should state what coverage there is for outbuildings.

[Don Jarvie]

I have 50k on my garage (shop) and full replacement cost for the contents (tools). You basically want enough coverage that you can rebuild and replace everything if something happens. You should talk to your agent since every state is different.

[Mike Wilkins]

Not sure of the state-by-state requirements, but most homeowners policies will cover any detached structure for 10% of the coverage on the home. You do the math. If you feel that is not enough, talk to your agent about extending the coverage amount for this detached building.
The contents of these detached buildings are covered under your homeowners policy; the amount is listed on your policy. And it applies to the tools, gadgets, lumber, and do-dads in this shop, provided it is on the same property as your home.
Do yourself a favor; do an inventory of your shop contents, and do not leave out anything. Insurance companies love documentation; the more the better. List all tools, brand names, model numbers, date of purchase, save sales receipts and owners manuals, and find a safe place to store this inventory (not the shop).

[Jim German]

Has anyone had to make a claim on a hobby shop? I'm curious how it would work for something like a big ole tool that cost say $10k new, but was bought for $1k or so. Assuming you don't have a receipt, do they just use some standard factor? I can't imagine they cruise ebay or whatever looking for comparable for each item.

[Keith Weber]

When my shop was in my basement, I was told by my insurance company that the tools would be covered up to $7000 for theft, and the full amount if destroyed by fire. I wasn't too worried about only having $7000 for theft, because chances are, a thief couldn't carry all of the heavy and more-expensive items up the stairs. I recently moved my shop about 40 miles away into a steel building on commercial property. My insurance company said that my homeowner's insurance probably wouldn't cover the tools away from the home like that. Does anyone else have a hobby shop located at a different location from their house property? I need to do something, but I don't want to pay the insurance rates that I'd pay if I had a business. My biggest problem would be to convince an insurance company that it's not a business (commercial property, lots of heavy industrial, 3-phase tools, etc.), but I haven't made a single dollar with my shop (nor do I want to). It's just a hobby for me. Anybody in a similar boat, or am I the only one?

[Wade Lippman]

Has anyone had to make a claim on a hobby shop? I'm curious how it would work for something like a big ole tool that cost say $10k new, but was bought for $1k or so. Assuming you don't have a receipt, do they just use some standard factor? I can't imagine they cruise ebay or whatever looking for comparable for each item.

I have never had a claim on my shop tools, but I have had other claims from having trees fall on my house twice. They paid me for what I replaced, at the cost to replace it. A few things I didn't want to replace and they paid me 25% of what I claimed the item cost. I found them very easy to work with.

My house has coverage for contents of 20% of the house value. I figure that is about 3 times what I need, but they won't let me take any less.

It also has coverage for outbuildings, but I don't have any so I haven't paid much attention to the amount. But I am sure you can get whatever you need.
YMMV

[Jim Andrew]

I just went over this after the first of the year. My building was only covered for 18k with the homeowners policy. So I doubled that. My policy was older, and covered the contents. So I made an inventory, then took a camera and took pictures. My wife had the photos printed and put them in a fireproof box.

[glenn bradley]

I have asked my agent like Russel D. has. It varies with your coverage but, the answer I got when I asked the question about 3 different ways was; as long as what's in my shop is under $40k, my current policy is fine. I have trouble believing much that comes out of an insurance person's mouth but, like lawyers, they are what they are. If he had the chance to sell me something I'm sure he would.

On the other hand, he is in the business of selling a product that is designed to deliver as little benefit as possible and they may not have a "home hobby" product and so just lump it in knowing they will look for any possibility not to pay when the time comes. . . . Was that too honest? :D

[Jon McElwain]

Has anyone had to make a claim on a hobby shop? I'm curious how it would work for something like a big ole tool that cost say $10k new, but was bought for $1k or so. Assuming you don't have a receipt, do they just use some standard factor? I can't imagine they cruise ebay or whatever looking for comparable for each item.

I had a claim a few years ago. Learned a lot...

The biggest insurance issue that every hobbyist woodworker needs to consider: is my insurance REPLACEMENT VALUE INSURANCE? That is, will your insurance carrier buy you a brand new tool to replace the one that was destroyed? Replacement value is just a little more expensive than the alternative. The alternative is sort of like car insurance - they will reimburse you the value of the item at the time it was destroyed. Say you pay $100 for a 1/2" drill. You have that drill for 15 years. Street value of that drill is now perhaps $30. Replacement value insurance will buy you a brand new drill, while the alternative will give you 30 bucks and send you on your way.

Another issue is the single item value limit. If you have en expensive machine, you need to make sure that it is covered. A common single item limit is $5000. So if you have a $10,000 CNC router, they may only give you $5000 for it if it is destroyed.

Thankfully, I had both replacement value insurance and no single item limits when I had a claim. Insurance bought me brand new everything and made all repairs to my shop building.

To make the claim, I had to itemize every item with the item description, date I bought it, how much I paid (even garage sale and gift items), and what the replacement cost would be. They sent my claim to a company that audits these sorts of claims and they came back with an offer on items they felt were over or understated. They had "senior claims investigator" call and try to negotiate several of the larger ticket items (over $5000) to see if they could save some on the claim. They must have asked me a half dozen times if I earned any money with the tools, craft fairs, favors/work for friends and family, etc.. My impression was that if I had ever made any money (and I had not ever sold anything or made any money out of my shop), that my claim would have been denied or reduced. They were very fair and in the end I had a better setup after it was all settled.

[Jon McElwain]

Has anyone had to make a claim on a hobby shop? I'm curious how it would work for something like a big ole tool that cost say $10k new, but was bought for $1k or so. Assuming you don't have a receipt, do they just use some standard factor? I can't imagine they cruise ebay or whatever looking for comparable for each item.

I did have one item worth $10k plus, but was purchased at a rummage sale for a couple hundred bucks. It was then given to me as a gift, I fixed it up, and insurance bought me a brand new one when it was destroyed. Replacement value insurance is just that. Make sure you have replacement value insurance. Oh, and they do cruise ebay and every other website source, especially on big items to make sure you are honest with your claim!! They did that and also asked me for supplier quotes on the replacement machines.

[Marc Ward]

When my I recently moved my shop about 40 miles away into a steel building on commercial property. My insurance company said that my homeowner's insurance probably wouldn't cover the tools away from the home like that.

At lease one company, ERIE INSURANCE, will cover your personal property anywhere in the "coverage territory" (US and it's possessions, Canada and Puerto Rico).

[Jon Nuckles]

I have a shop in space I rented a few miles from my home. My agent assures me that my homeowners' policy covers the contents of the shop. I haven't sold anything I've made and don't know if doing so would change the answer.

[Marty Tippin]

The biggest insurance issue that every hobbyist woodworker needs to consider: is my insurance REPLACEMENT VALUE INSURANCE?
...
Another issue is the single item value limit. If you have en expensive machine, you need to make sure that it is covered. A common single item limit is $5000. So if you have a $10,000 CNC router, they may only give you $5000 for it if it is destroyed.

Thanks -- that's just the kind of information I was looking for. I'm going to set up a meeting with the insurance agent soon and see how I come out.

Before woodworking, I was neck-deep in amateur astronomy, specifically astrophotography. I was able to get a stand-alone policy that covered my $20k+ in equipment for maybe $200/year. Never had to make a claim, but did have to provide them a detailed accounting of the exact items I wanted covered by the policy. And I didn't ask at the time whether I was buying replacement value insurance or not. I don't know if there are similar policies for high-value woodworking tools or not, but will definitely ask about it.

[William Payer]

The recent thread about the cost of the tools in your shop got me to thinking about whether my homeowner's insurance policy adequately covers all the "stuff" that's out in my wood shop. I'm just a hobbyist - I don't sell anything (yet), so I'm not talking about liability insurance or any kind of business insurance that the professionals here have - but given that I've got a 40x40 building that cost $30k to build and upwards of $20k in tools inside (don't tell my wife), should I be concerned that my homeowner's insurance policy won't cover me adequately in case of a fire or theft? At present, I only have the "vanilla" homeowners policy that I had before I started down the woodworking rabbit hole...

Are there special riders or additional policy endorsements that I should be looking into? Given the specialty nature of the tools and equipment, how would you ever justify the amount of a claim in case of a total loss?

I suppose a call to my agent would answer a lot of these questions, but I hate calling a guy who sells widgets and asking him whether I need to buy more widgets... I'd much rather have a good idea what I do and don't need before I pick up the phone...

Spoke with an insurance agent yesterday and covered some of your concerns. In Michigan, our outbuildings are usually covers for a percentage of the home's insured value (20% here) .Do the math. In my case increasing the coverage by an additional $20k increased my rates by $5 per year. This is for an unattached building. If attached(by as little as a continuous covered walkway) it becomes part of the home structure and falls under the coverage for the home. Have enough coverage to cover both the home and outbuilding in a severe loss like a tornado.

[Mark Patoka]

I don't have an outbuilding, just work out of my garage but did contact my insurance company when I became "legit" and got my tax number a few years ago. My homeowners does cover my tools but they were more concerned with what I was making and selling. Apparently this company did not want me selling baby or children's items. I assume for potential liability issues.

Your topic is a good reminder that I need to re-inventory and double-check my coverages though.

[Keith Weber]

At lease one company, ERIE INSURANCE, will cover your personal property anywhere in the "coverage territory" (US and it's possessions, Canada and Puerto Rico).

Thanks Marc, I'll look them up.

[Keith Hankins]

You need to check with your carrier. Most carriers by default will cover you tools, however there are limits. Generally there is a special "tools & jewelry/chash" catagory with a specific amount. In my case I have a great overall policy, but tools fall into a 2k limit. In other words, they will cover full loss up to 2k. I had to add a specfic rider for my guns and tools since they go significantly over that amount. It was cheap. I think I pay around 30$/year for the rider and I'm protected.

[John C Bush]

Another insurance issue I have wondered about but not pursued is injury liability. I have friends using my shop all the time--mostly with me there sharing my vast knowledge until they tell me to shut up and leave them alone--and maybe should consider my exposure if they are injured. How about a hold harmless document for them to sign before they are allowed to play with my stuff. I just do hobby projects and most that come to "play" have limited experience but are excited to learn about WWing, welding, etc. Any thoughts??

[Keith Hankins]

You should have a liability amount specified in your policy. Now if you are conduction a business then that gets into another area. I bought some land and found out I'd better add some coverage (which is covered under my main residence policy), in case some tree hugger is trespassing on my prop and a tree falls on them. Not lying! It was covered under my main residence policy as long as I called it out and had the address added to my policy declarations. However it's part of your total liablity. In my case thats a 300k/occurance max. I've since bought an umbrella policy that sits on top of my regular policy limits and kicks in at the point my max is reached. Believe it or not, that's cheaper than buying a large policy. go figure.

[Marc Ward]

Another insurance issue I have wondered about but not pursued is injury liability. I have friends using my shop all the time--mostly with me there sharing my vast knowledge until they tell me to shut up and leave them alone--and maybe should consider my exposure if they are injured. How about a hold harmless document for them to sign before they are allowed to play with my stuff. I just do hobby projects and most that come to "play" have limited experience but are excited to learn about WWing, welding, etc. Any thoughts??

I won't hurt, but probably won't help, either. They are covered under the liability section of your homeowners policy on your property if they are there with permission.

[Alan Wright]

I have asked my agent like Russel D. has. It varies with your coverage but, the answer I got when I asked the question about 3 different ways was; as long as what's in my shop is under $40k, my current policy is fine. I have trouble believing much that comes out of an insurance person's mouth but, like lawyers, they are what they are. If he had the chance to sell me something I'm sure he would.

On the other hand, he is in the business of selling a product that is designed to deliver as little benefit as possible and they may not have a "home hobby" product and so just lump it in knowing they will look for any possibility not to pay when the time comes. . . . Was that too honest? :D


Glen, my name is Alan and I am an insurance agent. I'm fairly thick skinned, but I see customers like you come in and ask for my help every so often. They make it clear they don't trust me, and think I'm out to screw em'. I politely ask them to go somewhere else for insurance. Life is too short...... and it's been my experience that insurance carriers are generally very fair, while many in the general public feel totally justified lying to insurance agents and carriers. People who consider themselves completely honest will inflate estimates, claim items for loss that never existed. And when asking about smoking habits for life insurance, or how far is your commute to work, people flat out lie. It never ceases to amaze me. I typically spend my day answering customer questions, and if a customer's buys a policy it's because he needs it, not because I want to sell something.

As far as the original post is concerned, the answer is "it depends on your policy" If you sell stuff, you likely need another type policy. It your commercial work is limited, a policy can be very reasonable. In any case, you want replacement cost. If you have low liability limits, get a quote to raise it to at least $500k. If you have questions call your agent. If they try to sell you coverage you don't want, don't buy it. Don't complain when you have a loss if you decide not to buy the right coverage.

Go in your shop and take a thousand pictures of all your stuff. Open drawers and take pics. Open cupboards and take pics. Then go upstairs and take another 1000 pics. Put the pics on a stick drive and store it somewhere outside your home. Give it to you mother. Give it to you best friend. Bring it to work..... repeat once a year. The whole process takes about an hour.

[Marty Tippin]

If you have questions call your agent. If they try to sell you coverage you don't want, don't buy it. Don't complain when you have a loss if you decide not to buy the right coverage.

Thanks for the insights, Alan. The problem I and many others have is that, if you know next to nothing about insurance (like most of us), it's impossible to differentiate between an agent trying to sell you something you don't need just to add to his revenue stream and an agent who's truly looking out for your best interest and wants you to have the coverage that really is best for you.

A healthy skepticism (or mistrust, if you want to call it that) is good - assume going in that a guy who deals in widgets is primarily interested in selling you some more widgets and you might keep yourself from spending unnecessarily.

This thread has most definitely been helpful, as I pointed out before - the need for replacement value insurance is something a lot of folks might not know to ask. Liability limits are another area to ask about.

[Kevin Barnett]

As a victim of an insurance agent's ignorance, not listening to your insurance agent is a pretty good idea. Read your own policy. Read the legal definitions.

[Jim Becker]

Depends on where you live (insurance regulations are at the state level) and your particular policy. It's always best to ask your agent for specifics about what your policy will cover. Folks who have "pro level" machinery may need to "do the dance" as there may be a perception of business even if it's purely a hobby, too.