How Operating a Home Business Affects Your Insurance

Cody Kukay
by Cody Kukay September 13, 2016 / No Comments

Whether you run a home daycare, have a carpentry workshop in your basement, or have turned the spare bedroom into your accounting office, your standard home insurance isn’t enough.

You may not need the elaborate commercial insurance policy a large company would buy. But you should consider adding endorsements to your home insurance or even buying separate business coverage to make sure you’re always protected.

For one, standard home insurance includes fairly low limits for business property such as specialized tools, equipment, and a laptop you only use for work. At The Co-operators, for example, a home policy comes with just $2,000 in coverage for commercial tools and books—and that’s only when those items are physically in your home. If you have expensive machinery, your garage doubles as a mini warehouse, or you travel a lot for work, that coverage isn’t going to go too far. Adding an endorsement to your home policy, however, is an easy way to make sure your business property is protected.

Home insurance includes some liability coverage—if the mail carrier slips on your porch, for instance—but it may not kick in if a client or colleague gets hurt on your property. And if the Canada Post worker falls while dropping off a business package, your home insurance won’t respond either. For that, you’ll need commercial liability coverage, which may not be available as an endorsement so you’ll need to buy a separate policy.

Other coverage to think about depends on what exactly your home business offers. If you make any sort of product (for example, artisanal olive oil soap, handcrafted oak furniture, or bespoke suits), you’ll need product liability insurance, which a home policy doesn’t cover. So if you buy this extra coverage and your soap gives clients a horrific rash or a client slips and breaks his/her leg at your home, your insurance provider will step in.

You might also need to buy errors and omissions liability insurance. This coverage—which is purchased separately from home insurance—protects businesspeople who offer professional advice such as lawyers, real estate agents, accountants, and consultants.

Let’s say you provide HR consulting from your home office and a client is facing a gender discrimination lawsuit because they acted on your ill-informed hiring policy suggestions. Sometimes the mistake doesn’t have to be so blatant: If you forget to sign one page, don’t pass on a single email, or don’t explain what you thought was a simple concept, your client could lose out financially and sue you for damages. In those situations, the errors and omissions policy would kick in and cover legal fees and any damages awarded to the client.

Even if you decide not to buy additional insurance for your home business, make sure to tell your insurance provider that your home doubles as a workspace. If you don’t, your insurer could deny your claim or void your policy because it didn’t necessarily agree to the material change in risk that a home office presents.

To estimate your insurance costs, get a home insurance quote.

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