Insurance for eBay Selling Business | Selling

sin-n-dex · 2024-08-06T23:37:29.904000Z

So I'm having to change insurance this week because my current home insurance won't put an endorsement on eBay sales for silly reasons. (My broker asked if it was OK for me to use a piece of fabric I bought in Australia to make a purse and sell it a year later and they said no, because the fabric comes from Australia). Yes, it was silly reasons, so I'm changing providers. The IRS/CRA have definitions of business income, and I know the IRS wants all dollars reported but that doesn't make you a business. There's hobby income and business income. The insurance company may have a different definition than what the IRS says, so make sure you're covered. What determines you're a business and might not be covered:- If you store any inventory at your house, for instance exclusively using a storage locker poses less of a risk than having inventory in your home, also having dedicated spaces to keep inventory will make you appear to be a business. - If you buy things with the intent to resell them later, even if it's minor, it's the concept that you bought something to sell and not for personal use. They view selling something you no longer need versus something you bought at a thrift shop with the intent to resell very differently in deciding if you are a business or not. - If customers ever come to your house to pick things up, it's considered business exposure and could leave you liable if something happens on your property - How much money you make at your online business... they don't have a defined amount, but for instance a couple thousand dollars might be seen as a hobby, enough money to live on is definitely a business - If you're reporting your selling income on your taxes (this is Canada applicable since it's not required to report money on things you sell online to CRA if they're YOUR things, but I know the IRS wants all monies reported). Having a business number or HST registration number would make you a business for sure in Canada. I presume in the US having a sales permit or documents relating to sales tax would be the same thing - If your insurance company has any silly rules about online selling (for instance what you can sell, they have rules about consignments, in my category I'm not allowed to restore any antiques in my home), my current company is giving me a few days to switch coverage because they don't cover any business conducted outside of Canada, this includes me buying fabric to make purses with while on a personal vacation, believe it or not Insurance might determine you can't have home insurance with an endorsement, but rather you need a commercial policy. I tried to get a commercial policy a few years ago but they wouldn't quote because I had no inventory in my home, now that I have my own stamps and postcards and they are aware of it now, I need to change providers. Also when there's an investigation, they know what you're doing. They will require things like income tax returns and business records to see what you've been doing in deciding if they are going to cover or deny your claim. It's considered "mispresentation of material fact" when you get a policy that doesn't adequately cover what you do. It's in the same category of using a relatives address to get cheaper car insurance. If caught, they will deny your claim, and they will catch you. Maybe for another post, but I can share stories since I worked in the industry for several years. I know lots of posters here have things like storage lockers and business insurance and such. Perhaps it's not too difficult to get these policies in the US. In Canada we have home insurance policy and you get an endorsement to let you do "higher risk activities", but if you don't qualify for that they make you go commercial. For instance renting part of your home is something they want to know about (and in Canada they want to know everyone who is in the home, whether they pay rent or not). I thought the post was worth sharing because I could have been caught without insurance if I wasn't regularly following up with my broker on what type of business activities I do in my home. I've been told selling stuff is OK, but I can't leave my items in consignment shops (that's the no consignments rule), I can't use materials obtained outside of Canada, and a bunch of other things that don't really apply. My broker says getting coverage shouldn't be a problem it's just going to cost more money (but at least I'll be covered). I know lots of people in this forum say they're just selling stuff around the house and then we see 5 of the same electronic device in their solds or quantity that makes it obvious items were bought for resale. Insurance doesn't play by the same rules as the IRS, so make sure you're adequately covered for what it is you do. C.

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