Being able to work from home is one thing. But owning your own business and operating it from home takes you to another level. Especially when it comes to your home insurance requirements.
Insurance for Home Business
Being as the business is being operated out of the home the same risks are present. Referring to those that come with regular home ownership. The three categories important for insurance for a home business are;
- Perils Coverage
- Personal Belongings Coverage
- Liability Coverage
Which Three Types of Insurance Coverage is Important for a Home Business?
All three have some level of importance. But, if one had to choose just one, it would probably be the liability coverage.
Does Regular Home Insurance Cover a Home Business Liability?
The answer to this question would most likely be no. Or least if it did it would be limited. Businesses of any type usually demand various types of commercial insurance coverage. For this reason, many are concerned about the increased cost of the insurance. But, this too is going to vary depending on the type of business and its location.
What Can Go Wrong with a Home Based Business?
One never likes to dwell on the negatives. But, when it comes to a home-based business people have to be realistic. A home-based business could create more liability risks compared to a separate commercial establishment. The reason being is because of rules and regulations. These are not as stringent most often for home-based businesses. Often business rules and regulations set the foundation for many safety factors.
Here is an example of where liability could be an issue with a home-based business.
Several years ago the Star paper ran an article about a home business mishap that clearly shows how a simple mishap could lead to serious consequences. A couple that ran a home based tea consultancy business received a complaint about a bumble bee being found in her loose leaf tea. Simple as this may sound it could have had some serious consequences. In this article, Peter Warner from the Insurance bureau of Canada was quoted as saying “The worst case scenario is that you could be financially ruined if you don’t have insurance,” source: The Star.
Although this is information that pertains to several years ago, the same holds true today.
There are plenty of common everyday occurrences that can go wrong with a home-based business that is just strictly property related.
What happens if a delivery person slips and falls while on your property?
There is a possibility that something could fall on an individual that is in the work area of your home. Particularly if you have stacked inventory.
Separating Home Business Use From Home Use
Although you may have standard home insurance most likely, it would not cover incidents that were related to business activities that took place in a home business setting.
What Will Your Home Business Insurance Cover?
Aside from traditional home coverage, there is a need for additional forms of business protection. Such as;
Most home businesses require extra equipment outside of what normally would be found in the average home. Some examples are
- High tech computer equipment
- Commercial printers
- High-end communication equipment
- Specialized equipment related to the business
- Office supplies
- Storage units or high-end shelving
- Collection of Software
All of which would most likely not be covered with homeowner’s insurance.
Many home-based businesses are very successful financially. There are many potential events that could take place that could cause business interruption. These can be lengthy and could have a serious effect on the financial aspects of the business.
For example, if a fire broke out. Then the standard homeowner’s insurance would provide the traditional coverage. But, for the business property most likely there would not be enough personal insurance to cover the losses of these or the repairs. Then there is the downtime for the business.
Options for Insuring Home Based Businesses
There are a lot of options when it comes to access to different insurance companies in Canada. As such this provides choices for when it comes to home insurance. But, insurance shoppers want to choose an insurance company that offers one of two options.
- Separate insurance for the home based business
- Add-on coverage for the home-based business.
- Keep in mind the following aspects when it comes to home insurance for a home-based business.
- Normally the home-based business is restricted to one or two operating the business.
- What type of business insurance is your insurance company prepared to offer you?
- How much coverage you will need for example the replacement value of the business property. Which includes items such as inventory and equipment.
- Will the insurance cover your stock when off the premises?
- Is there insurance coverage available for loss of business related cash that was kept on the premises?
- What is the company offering for business interruption income?
- Is there enough liability coverage being offered?
What About the Premium Cost?
Naturally, home business owners are going to be concerned about the costs. There are a few factors to keep in mind for this.
- Is the insurance company offering a discount because they hold the policy for the standard homeowner’s insurance?
- Are there any business discounts being offered?
- Is the cost of the premiums offering true value by way of coverage
Be Diligent When Shopping for Your Home Based Business Insurance
Just as you shop for any other type of insurance, it is important to shop carefully. You can use the same process of getting quotes for your home business insurance. You can take these quotes and compare them. Also, having some idea of your wants and needs you can ask the right questions. Don’t make the mistake of operating a home business without having the right insurance. Don’t just assume that homeowners insurance is going to be sufficient.