Perhaps you’re operating a small business out of your home, or maybe you’ve decided to start one in the future – congratulations! You probably have a long “to do” list, but one critical item should be contacting your insurance provider. This is of the utmost importance, because:
- Some home insurance policies are actually entirely void if you’re operating a home based business without express permission from your insurer. This means that claims for any loss or damage to your property can be denied, even if that loss has nothing to do with your business.
- Home insurance policies cover your “personal property,” not your “business property,” so talk to your insurance provider to find out what your policy may or may not cover.
You may not think you need insurance for your small home business, especially if it’s small or part-time, but there are some very real risks you need to be aware of.
What risks should you consider?
- There could be damage, such as fire, water, or windstorm to your home, which also damages your business property. Remember, home insurance covers only your personal property, not your business property, so you could be stuck replacing your desk, filing cabinets, computers and more, all out of your own pocket.
- What if your home is so badly damaged that it’s going to take a month or more to repair? Are you able to run your business from your hotel room? If not, you’re not going to be making any money during this time. Can you handle this loss of income?
- Do you have any stock or goods held for sale? If so, all of these will be excluded from ordinary home insurance policies. You need special protection for stock and goods.
- What if a customer comes to your house, falls down the stairs, and sues you for their injuries? Will a home insurance policy respond? Not likely, if the customer was there for business purposes, or if the home is used for any business purposes without your insurance provider’s permission. Remember, home insurance policies are not designed or priced to cover the extra risks involved in running a home business.
- Maybe you have an employee working for you, and she takes her car to Costco to pick up some supplies. She’s in an accident on the way, and injures a third party. It’s quite likely that not only will she be sued as the driver, but you’ll be sued as well, since she was your employee, using her automobile for your business.
- Business property: Your home policy likely provides a limited amount of coverage for business property, to cover such things as a desk or computer. You want to make sure your business property is insured to its replacement cost, not its depreciated value. Also, if you want stock or goods held for sale to be covered, you’ll need to purchase extra insurance.
- Business interruption: Your home insurance policy will probably not contain any protection for you if your income is interrupted as a result of damage to your home. This is a form of business insurance that is readily available, and is very important, particularly if this is your sole source of income. Some home insurance policies may be able to add this coverage, or you may need to speak to a commercial broker.
- Liability: So many issues arise here. We talked about how you can be sued if someone slips on your steps, but what if they’re injured using a product you created? Non-owned auto liability is important if your employees are using their vehicles for your business. Personal Injury insurance is available for things such as slander or libel. Professional Liability insurance is absolutely essential if you work in a capacity that could harm other people; for example, if you’re a hairdresser, and accidentally burn someone’s head with perm solution.
- Does your business involve the application of fire or heat? This could mean baking, welding, operating a kiln.
- Does your business involve the use of specialized tools or flammable materials to make or repair goods? This refers to things like carpentry tools or acetylene torches. Specialized tools can be very expensive to replace. Policies generally provide a limited amount of coverage for tools, and no coverage if something happens to them away from home.
- Are you operating a daycare? It goes without saying that there are major risks associated with caring for other people’s children in your home: choking, falling off a swing, food poisoning, and many more. Few home insurance policies will properly protect you if you are operating a daycare, so be sure to contact a commercial insurance provider.
- Does this business employ people that work from your home? Do you receive more than 5 customer or supplier visits per week? You may need to carry commercial liability insurance to protect you if your customer, or your employee, slips and falls.
What insurance might you need?
Be sure to discuss your home business operations with your insurance provider. They can let you know what is and is not covered by your home policy. Often, optional extra coverage can be added to a home insurance policy in order to protect a home based business. In some cases, depending on the type of business, you may need to also contact a commercial broker for broader coverage.
Here are a few common elements of business insurance coverage:
For many of these unique business exposures, you may need to see a commercial insurance provider to discuss the best way to protect yourself.
How does Square One assist customers with home-based businesses?
At Square One, our focus is to meet your personal insurance needs. While we’re able to accommodate some home businesses, you are often better suited speaking with, and securing protection from, a commercial insurance provider. When securing a quote from Square One, we will ask the following questions if you are operating a home business:
If the answer is yes to any of these questions, we likely won’t be able to insure your home. Our coverage is designed primarily for personal residential exposures, and may not protect you properly if you operate a home-based business. To discuss your needs, or to get a quote on your home insurance, contact Square One at 1.855.331.6933.