First off, local municipalities often have laws/regulations
governing what can and can’t be in a private residence. Whether the
home is single-family, multi-family, or apartment and rented or
owned should also influence the decision. A call to your local
zoning board should be able to clear it up for you. When I set up my
"secondary" studio in my home (also in PA outside of philly), I
called and explained what I wanted to do and discussed it with the
zoning officer. He advised me on certain “boundaries” (i.e., seeing
customers in my home by appt vs a storefront “walk-in” operation).
He also made me aware that it is illegal to have any type of propane
cannister in an enclosed building, but that there was no problem
with acetylene (a fairly common distinction). If I was going to run
my torch on propane, the tank would need to be installed outside
with piping running from it into the structure. That was one of the
many reasons I went with acetylene for my torch setup.
The other side of your question is actually an insurance one. I
would, again, recommend talking with your homeowner’s insurance
agent. In our case, all we needed was a policy declaration for tools
and materials to be 100% covered for replacement value (again, an
important distinction). I pay a slightly increased (I think around
$10/month?) premium for the rider, but the peace of mind is worth
it. I think of it the same way as the rider that covers other
expensive items (over $2000/each) like jewelry, antiques, etc. - if
they are something that valuable, it pays to cover them.
Hope this helps!