Setting up a home-based business is appealing to many Canadians, particularly as the start-up costs are typically much lower than setting up in a commercial location. It is a common misperception, however, that a home-based business is covered under a home property insurance policy.
A business needs its own insurance for protection; it is not protected by virtue of being located where there is an existing insurance policy. Home-based business insurance can protect you and your business from the risk of potential losses; you don’t want to expose your company to significant liabilities that threaten you and/or your company’s viability even if your business is only a part-time endeavour.
Home-Based Business Insurance
If your business is a one or two-person business operation, then home-based business insurance as an extension of your home insurance may be sufficient instead of obtaining a separate commercial insurance policy. The business property and liability insurance you will gain is valuable because your home insurance policy will not otherwise protect your business, such as from a loss due to a fire, water damage or injury accidents.
In some cases, your business would fold if you could not afford to replace or repair accidental property damage to your home business and its contents, such as your desktop or laptop computer, software, storage device, cell phone, fax machine, whether day-to-day information to run your business is stored on these devices or your client contacts, invoicing, bookkeeping and tax filings. Property insurance will also cover you for items you stock, equipment you use and goods that are ready for sale up to a limited amount.
The liability insurance component of home-based business insurance will protect you or your business in the event that you incur liability for visitors to your home for business purposes, such as clients, delivery personnel and any employees who could have a serious slip and fall accident (e.g., on your icy driveway). Potential risks of caring for children in your home is another reason to buy business liability insurance (e.g., if a child chokes on food or gets hurt playing on your backyard playground equipment). Business liability insurance is critical to protect you from accident liability, especially if your business has unlimited liability due to being a sole proprietorship.
Additional Insurance Options for a Home Business
Several other types of insurance that are not covered under a home insurance policy are available separately, professional liability and product liability insurance, among other insurance types related to specific industries or occupations. These insurance types are discussed briefly below.
Professional Liability Insurance
If you are professional (e.g., a medical professional providing health or personal-care services such as registered massage therapist), it is important to protect yourself against claims related to your delivery of professional services. Many professionals (e.g., lawyers and accountants) are already required to obtain this insurance in order to keep their licence in good standing.
Errors and omissions insurance is commonly obtained by those who provide professional services, such as event organizers, marketers, translators, freelancers, authors, bookkeepers, and tax preparers. The reason to take out errors and omissions insurance is to protect you from damages and legal defence costs if you advise clients wrongly or fail to provide expected advice and your client or his or her business suffers as a result.
Product Liability Insurance
Although you may produce products for your business in your home, you are responsible for the products you develop, manufacture and sell. If there is an injury due to defective merchandise (e.g., clothing that is determined to be unsafe for children), then you and/or your business could be substantially liable for compensation.
Additional Insurance Related to Your Occupation or Industry
While all home businesses need basic protection, specific needs for additional insurance will vary by occupation and industry. For example, you may need malpractice insurance if you are a hairstylist or groomer or farm insurance if you grow produce for sale on your property. If you have valuable items in your home that you buy and sell (e.g., an auctioneer of valuable paintings or rare coins), then you may want additional crime coverage as part of your home-based business insurance to protect against losses from theft, robbery or burglary.
Contact HDF for Your Home Business Insurance Needs
At HDF Insurance, we can help you to obtain home-based business insurance at a reasonable cost and to assess when you might need a separate commercial – business liability insurance policy. We have a long history of helping small business start-ups grow to become large enterprises. We compare plans at different insurers to bring you the best options. Contact us at HDF Insurance for information about what type of policy is best for your business. We can be reached at 1-800-567-2048.