Every home business can benefit from some type of business insurance, even if it’s a simple liability policy to protect you if work you do for a client leads to a lawsuit. Other home businesses may store dangerous materials in the home, or even meet clients there. These businesses should all consult an insurance broker, who will propose an affordable personal or business insurance package to meet any home business’ needs.
Everybody knows that if you have a business, you need business insurance. The question then becomes, what constitutes having a business? If you have a big office, a fleet of vehicles and a team of 500 staff, that definitely counts. But what if it’s not so cut and dry? When you run a business from home, you may require insurance just like any other business. But how do you know?
How do I know if my home business needs insurance?
Maybe you’re a contractor, and you work all over the city on different job sites, but you keep your tools, equipment, and materials at your home. You probably do all your billing and accounting at home as well. Maybe you have a full-time job, and you do some freelance work from your home computer for extra money after-hours. Again, in that case, you’re probably using your home to do all the billing etc. Or what if you babysit a couple of neighbours’ kids after school? There are a number of factors that together determine whether or not your home-based business requires a business (commercial) insurance policy:
- How much money do you earn from the business?
- Is the business your sole source of income?
- Does the business employ people other than the business owner?
- Do you store business equipment or supplies at home?
- Do you meet with clients or business partners at home?
- Do you care for children or other vulnerable people?
- Do you have signage on the property or on your vehicle that identifies the business?
Depending on your answers to the above questions, your insurance broker may recommend that you either add an endorsement to your home insurance policy, or possibly that you get a separate business insurance policy to properly cover the business, and you, from common risks associated with running a business. Even if you answer in the negative to the above questions, there are certain types of home businesses that always require business insurance, including contracting businesses that have you do work on other people’s homes and business. The fact is that outside of a full-time job, any activities you undertake to make money are considered having your own business. Whether you earn $1,500 a year or $150,000, and whether or not you declare the income on your tax return, whenever you offer products or services for a fee, you are conducting a business, and you probably need some form or insurance protection.
Doesn’t my home insurance cover me?
The good news is that if you run a business from home, your home insurance policy may cover a small amount of business equipment that you store there. But if you see clients at home or store more than a few thousand dollars worth of business equipment there, you’ll want to talk to your insurance broker about adding an endorsement to your home policy that will cover you for business contents up to $10,000 or $50,000, and third-party liability. This is the minimum additional insurance you’ll need (beyond your home insurance policy).
Careful if you’re covered under your home insurance
Many insurance companies will offer what is called an endorsement to your home insurance policy, that will give you some degree of coverage for your home business. But these endorsements are typically very restrictive in terms of what they cover, and most businesses do not qualify. For example, you may not qualify if…
- Your business has revenues over $200,000 a year;
- You are not the sole owner of the business;
- Your business is incorporated;
- Your business sells any kind of food;
- Your business is a home daycare;
- Your business sells anything outside of Canada.
Even if you are able to buy the endorsement, if you have a claim, any of the above factors could be grounds to deny the claim if your circumstances have changed since you bought the policy.
Sometimes a separate business insurance policy is better
Note that a business endorsement on your home policy can cost between $100 and $600 a year, depending on the level of coverage you need. It’s a good idea to get some quotes for proper business (commercial) insurance. It’s possible that for a few hundred dollars more, you might be able to get a whole lot more peace of mind. Give us a call if you have a home business and you’re not sure what coverage you need. We have brokers specializing in both personal and business insurance, so we’ll be able to set you up with whatever you need.