In today’s society and changing economy, running a business from your home is becoming more popular and appealing. Some people may start up side business to supplement their full time employment income while others are self-employed entrepreneurs who use their home as their workplace headquarters. Regardless of which category you fall under, something you may have not thought about is how this might affect your property insurance coverage.
Under your property insurance policies, your policy is there to cover you in the event of a covered loss on your building, contents or under liability. But did you know that most personal lines property insurance policies will specifically exclude liability claims arising as a result of a business being ran out of your home? You may not immediately recognize any possible liability exposures relating to your business, but what about the courier coming to your home to deliver business supplies or documents relating to your business? If they slip on your walkway while making that delivery and sue you for their injuries, this type of loss would be excluded under your personal property insurance policy because it is related to your business operation. Most property insurance policies will also limit coverage on equipment related to a business to a small amount of coverage and only cover them while they are located at your home.
So given what we have discussed about the exclusions under a personal lines property insurance policy, if you are running a business out of your home, how do you make sure you are insured properly? The first thing you need to do is call your insurance broker and have a discussion with them. Your insurance broker will want to know things like: the type of business you are operating, do you have people come into your home (i.e. hairdresser or daycare) or is it just you sitting in an office (bookkeeper or consultant), how much money do you make annually and do you do any business outside of Canada. Depending on the size, scope and type of business you are operating out of your home, your insurance broker will be able to recommend the best coverage solution for you.
Most personal property insurance companies will offer a coverage that can be added onto your property insurance policy called a Home Based Business Endorsement. Not all types of home based business qualify for coverage under this endorsement and that is why it is important to review the nature of your business with your insurance broker to ensure you qualify for this coverage. This additional endorsement, in exchange for an additional premium, will provide you with liability coverage to cover your business operations and also provide coverage for your business supplies and equipment located in and away from your home.
What if my business does not qualify for the additional coverage under my property insurance policy? Then you will be required to take a full Commercial General Liability policy that your broker will be able to obtain for you through their commercial department. A CGL policy is often required when the business you are running is more of a professional operation than a part-time business to supplement your income or the risk exposure is greater than a personal lines policy would be equipped to respond to.
Running a business out of your home can be rewarding both professionally and financially but it is important that you understand that there are implications with your home insurance. To make sure you are covered properly, call your insurance broker to review your business prior to starting. Your insurance broker will be able to provide you with professional advice and give you the best coverage for your needs. This will make sure that both your personal and business assets and liability are always fully covered.