Taking Care of Business… from Home: Finding the Proper Coverage for Your Home-Based Business
In February, we wrote to you about the volatile, or “hard,” insurance market that is causing premiums to increase, and is heightening underwriting requirements.
In the past few months, our commercial insurance team has noticed an increase in the number of home-based businesses that require commercial insurance policies, instead of being covered by an extension from their home insurance.
Here is what you need to know about insuring your home-based business.
What Is a Home-Based Business?
A home-based business is any type of business primarily operated out of the business owner’s home, regardless of the size or scale of operations.
Home-based businesses usually have a small number of employees, and no brick-and-mortar retail or office space.
If you work from home, like I do, for a company that is primarily operated out of another space (an office location, for instance), you do not need home-based business insurance. You are working remotely for an organization, not operating a business from your home.
Will My Home Insurance Cover My Home-Based Business?
Lots of home-based businesses can be adequately insured through an extension from your home insurance policy. This is typically the most affordable option for small-business owners, but not all businesses qualify.
Only certain classes of businesses run from the home can be covered through your home insurance policy. Common examples of eligible businesses include:
- Accounting and bookkeeping
- Real estate and notary public
- Financial planning and debt counselling
- Clothing and jewelry sales
- Art lessons, studio, or artist goods sales
- Music and drama lessons
- Embroidery, crocheting, knitting, sewing and alterations
- Musical instrument repairs
- Shoe and clock repairs
Home insurance companies have a number of criteria that must be met for a home-business operator to qualify for coverage through their home insurance policy, often including the following:
- The business must have Canadian exposure only (no online sales or importing from other countries)
- Not more than 50% of the home is used for the business
- Only one business is operated out of the home
- Some insurers stipulate the business owner may not own or operate any other businesses
- Limits on the number of owners/operators of the business and employees
- Some insurers stipulate that all employees must be household/family members
- The gross annual receipts must be under $75,000 – $250,000 depending on the insurer
There is an additional premium charged for home-based business coverage, usually $200-$300 per year for a basic amount of coverage for liability and business property.
If your home insurance policy will extend to cover your home-based business, you may still require supplementary coverage, depending on your operations. Professionals, such as architects, lawyers, paralegals, accountants, financial planners, and travel agents, should carry professional liability to ensure they are covered for any claims arising from negligence or malpractice. Your commercial insurance broker can help you with this.
To determine whether your home-based business can be covered by your home insurance policy, contact your home insurance broker.
What if My Home-Based Business Cannot Be Insured Through My Home Insurance Policy?
For home-based businesses that do not qualify for coverage through your home insurance policy, contact your commercial insurance broker.
Your business insurance broker will set up a commercial insurance portfolio tailored to you, including the combination of coverage you require for:
- Business property (tools, equipment, stock)
- General liability
- Business interruption
- Professional liability
- Errors and omissions
- Cyber liability
How Do I Get a Business Insurance Quote?
The coverage you need depends on the size and scope of your business operations. Your commercial insurance broker will be able to design a business insurance package for your unique situation.
To get a quote, contact your commercial insurance broker, and have the following information handy:
- Description of all operations
- Number of employees
- Gross annual receipts
- Details of your home/workspace (address, structure type, age)
- Estimated replacement value of all tools and equipment
- Description of all larger and/or specialized equipment or machinery
- Security details (e.g. does the home have an alarm)
- Details of any company vehicles
Ensuring your business is properly insured is an important part of your business’s financial health. Contact your local insurance broker to get a quote!