How to insure a home-based business to protect yourself, your home and your business
Small business owners who have home-based businesses often tend to overlook the relevance and importance of insurance. Not insuring a home-based business is one of the common mistakes small business owners make.
Most people assume that their home insurance is sufficient, but that’s not the case. In fact, your home insurance can be voided by your home-based business activities, leaving you liable and vulnerable to costly issues.
So to help you understand home-based insurance and find the right type of small business insurance in Ottawa, read on.
WILL MY HOME INSURANCE POLICY COVER MY HOME BUSINESS?
You cannot count on your house insurance for a home-based business. Your house insurance will cover all things related to your home, whereas anything business related will need separate coverage.
You can get additional coverage from your home insurance provider to cover your business. However, this additional coverage may not be enough to cover all of your business needs. So beware of the limits and consult with an Ontario small business insurance provider.
Home-based business insurance can cover claims for your office equipment and business inventory—both on and off-premise. There is also business interruption insurance to cover the loss of income if damage to your business prevents you from continuing your business activities—e.g., a fire, flood, or other natural disasters.
Home-based business insurance can also cover you for liability, protecting you from costs in case clients, employees, and delivery personnel are injured or suffer damages in relation to your business.
WHAT ARE THE RISKS OF NOT INSURING A HOME-BASED BUSINESS?
Around 40% of small businesses won’t recover after a disaster. And liability is the largest threat to a business. A lawsuit could take up all of your time and money and drive your business into the ground if you’re not insured.
Your home insurance alone won’t cover liability, damages, or loss. And if your home insurance company finds out that you’ve been running a business from home without insuring your business, they can deny claims and refuse to renew your home insurance coverage.
TYPES OF HOME-BASED BUSINESS INSURANCE
The types of home-based business insurance you need will depend on the type of business you’re running from your home. Here are the basic types of business insurance that all home-based business owners should have:
If you have employees, clients, and delivery personnel visiting your home-based business, then you will need general liability insurance for your small business. This insurance protects you from liability if someone gets injured at your business. For example, if a client or employee slips and falls while visiting your home office, your business liability insurance would cover the injury.
But if a friend, family member, or another guest who’s visiting you at home (and not for business purposes) gets injured at your home, your homeowner’s liability insurance will cover them, not your business liability insurance.
If your business sells a product, consider product liability insurance. This type of insurance can protect your business from liability due to your product’s non-performance.
And if your business provides services, professional liability insurance will protect you and your clients if your client claims to have suffered damages due to your actions as a professional. There are various types of professional liability insurance to suit specific business categories, such as malpractice insurance for medical and health services. So look into the best type for your business.
LEGAL EXPENSES INSURANCE
Having your legal expenses covered by insurance will prevent you from losing your business due to high legal costs.
BUSINESS PROPERTY INSURANCE
While home insurance covers property damage, loss, and theft for your personal belongings, business property insurance will cover your business belongings or contents.
Business contents are all equipment and inventory you use in your business. Look around your workshop or office and create an estimate of the cost to replace all of your inventory and equipment. The cost of replacing items in your home office alone—such as your laptop, printer, and phone—can certainly add up. Valuable documents—such as financial records and client lists—may also be insured.
Often, the cost to replace business property exceeds the contents limit of a homeowner’s insurance policy. And if you use any of this business property outside of the home as well, then you’ll need separate contents and property insurance.
WHAT IS COMMERCIAL GENERAL LIABILITY INSURANCE AND WHY DOES MY HOME BUSINESS NEED IT?
Commercial liability insurance covers your legal costs in the event of a lawsuit related to your business. It protects your business from liability for injuries or property damage to third parties, and can cover you both on-site (at home) and when you and your staff are conducting business off-site.
WHAT IS TECHNICAL ERRORS AND OMISSIONS (E&O) COVERAGE?
Errors and omissions (E&O) insurance protects you from lawsuits if you make a mistake or a professional misrepresentation that leads to property damage or bodily injury caused by a professional service that you provide. Also, if your client experiences a financial loss due to your professional service’s errors or omissions, E&O insurance will cover you.
Any professional who gives professional advice and could be sued for negligence should have E&O insurance.
This insurance will cover you if you:
- Gave a client the wrong advice;
- Failed to provide the expected advice;
- Made a mistake (e.g., when filling out a form) and it affected one of your clients.
WHAT IS PRODUCT LIABILITY?
Product liability insurance protects you from liability based on the function or use of your product. Often, product liability refers to situations when customers claim that a business’ defective product caused them property damage or bodily injury.
HOW DO I INSURE MY HOME-BASED BUSINESS?
To find the right type of small business insurance in Ottawa for your home-based business, get a free business insurance quote from Gifford Carr Insurance Group. With the right coverage, you can have peace of mind knowing that your business is protected from devastating financial loss.
Home insurance won’t cover all of the risks your business could face, so don’t take any risks. Insure your small business today.