Does Your Homeowners Policy Cover Your Medical Device Startup?

No. A homeowners policy explicitly excludes business activity, and a medical device startup run from a home or garage is business activity. Early-stage founders assume the policy covering the house extends to the company forming inside it. It does not, and the first product liability claim or the first loss of business equipment is when that becomes clear, at the worst possible moment.

The Business Exclusion Is Deliberate

A homeowners policy covers the dwelling, personal belongings, and personal liability for the household. It is priced for residential risk, and it carries a business-pursuits exclusion precisely so it does not absorb commercial exposure it never underwrote. When you build, test, or ship a medical device from home, the property and the liability tied to that work fall on the business side of that exclusion. The carrier did not forget to cover it; the policy was written to leave it out. Personal coverage and business coverage are different products for different risks, and the boundary between them is the exclusion most founders never read.

The trap is that nothing flags the gap until a claim arrives. The policy renews quietly, the company grows quietly, and the assumption that the house policy has it all covered goes untested until the day it is tested by a loss.

Where a Device Startup Hits the Gap

Two exposures surface first for a home-based device company. The first is product liability. The moment a device is used on a person or leaves your control, a bodily-injury claim becomes possible, and that exposure can begin well before any clearance, which is why coverage should be timed to first human use and first shipment rather than the FDA calendar. A homeowners policy answers none of it. The second is the business property itself: prototypes, lab equipment, components, and inventory are business personal property, and a fire or theft that a homeowner would expect to be covered is excluded when the items belong to the company.

A founder who assumes the bundled house policy is enough is making the same category error as a founder who assumes a small-business bundle covers a regulated device, the gap explained in why a standard BOP does not cover a Class II device. The exposure is commercial, and it needs a commercial program.

What the Company Actually Needs

A device startup needs its own commercial coverage, scaled to its stage. Product liability is the central line once there is human use or distribution, the exposure mapped in products liability for medical device manufacturers. General liability answers third-party premises and operations claims. Commercial property or an equipment line covers the prototypes and equipment the homeowners policy excludes. As the company takes on a contract manufacturer, a clinical site, or investors, each of those relationships tends to require evidence of coverage the home policy cannot provide.

The point is not that a founder needs a large program on day one. It is that the right program is a commercial one, even when it is small, because the homeowners policy provides zero of it for the business. A packaged business policy is the wrong instrument too, because a BOP generally excludes a device company from eligibility.

What to Do Now

Stop relying on the homeowners policy for anything the company does. List what the startup actually has at risk, the device exposure from any human use or shipment, the equipment and prototypes, and the contracts that will demand proof of insurance, and place commercial coverage against each. A short conversation with a broker who places device programs will identify which lines need to bind first and which can wait, so coverage tracks the real exposure rather than the calendar.

Before you bring on your first manufacturer, site, or investor, confirm the company carries its own commercial program rather than leaning on a personal policy that excludes it. A specialty review through Tower Street Insurance can map a home-based device startup’s real exposures to the coverage that answers them.