I turned my garage into a warehouse. I have 300 bottles of Blanton’s and Weller that I hunt down and resell for a 50% markup. I call it a “hobby,” but I made $40,000 last year. Last month, my garage was burglarized. I claimed the loss. The adjuster asked one question: “Do you file a Schedule C tax return for this?” I said yes. He said, “Claim denied. This is a business inventory.”
Key Takeaways
- The “Hobby vs. Business” Line: If you buy with the intent to resell for profit, you are a business. Homeowners insurance covers personal property, not business inventory.
- The “Business Property” Sub-Limit: Most home policies have a tiny limit for “Business Property on Premises”—usually $2,500. If you lose $50,000 of stock, you get $2,500.
- You Need a Commercial Policy: You need “Inland Marine” or “inventory coverage” for a small business.
- IRS vs. Insurance: If you tell the IRS it’s a business to deduct expenses, you cannot tell the insurer it’s a hobby to get coverage. They talk to each other (via document requests).
The “Why” (The Trap)
The trap is “Occupancy.”
A residential policy is priced for a home, not a warehouse. Storing high-theft items like whiskey for commercial sale changes the risk profile. If you don’t disclose this usage, you are guilty of “Material Misrepresentation,” and they can void your entire policy.
The Investigation (I Quoted Commercial Lines)
I tried to insure a $50k whiskey resale inventory.
Hartford (Small Business)
- Product: “Business Owner’s Policy” (BOP).
- Cost: Approx $600/year.
- Coverage: Covers theft, fire, and liability (if a bottle you sell makes someone sick).
Personal Floater (Chubb)
- Response: “We cover collections meant for enjoyment. If you sell more than a few bottles a year, we may cancel you.”
Comparison Table
| Feature | Personal Home Policy | Commercial Inventory Policy |
| Coverage Intent | Personal Enjoyment | Resale/Profit |
| Limit for Biz Goods | $2,500 (Typical) | Policy Limit ($50k+) |
| Liability (Product) | None | Included |
| Cost | Included | ~ 50−50− 100/mo |
Step-by-Step Action Plan
- Define Your Intent: Are you drinking them or selling them? If selling, get a BOP (Business Owner’s Policy).
- Separate the Inventory: Keep your “Business Stock” physically separate from your “Personal Collection” to avoid confusion during a claim.
- [IMAGE: Photo of two separate shelving units, one labeled ‘Personal’ and one ‘Inventory’]
- Check Your Policy: Look for “Special Limits of Liability.” Find “Property used for business purposes.” Read that number (usually $2,500). Panic. Then buy a commercial policy.
FAQ
Can I resell a few bottles and stay ‘Personal’?
Yes. Occasional trading to refine a collection is fine. Systematically buying cases to flip is a business.
What if I keep the whiskey at an office?
Your home policy usually extends limited coverage ($1,000) to business property off-premises. You still need a business policy.