The way we work in Canada has changed. You might turn a hobby into an online shop, run a freelance consulting business, or open a home-based baking business in Ontario. All of these situations make you part of a growing group of Canadian that may need to consider purchasing additional insurance for your business. By assuming items related to your business pursuits, are automatically covered through your property insurance, you take on the risk of potential claims being denied or possible cancellation of your home insurance.
What Is Home-Based Business Liability Insurance and What Does It Actually Cover?
Home-based business insurance is not a one-size-fits-all product much like your home insurance policy. Insurance companies that offer coverage for these scenarios each have their own rules and guidelines to meet as well as lists of eligible businesses to fit under a home based business extension. The purpose of this liability coverage is to close the protection gaps that exist in a homeowner or tenant policy if the business is being held responsible for an insured loss.
Business Property and Inventory
Most home insurance policies only cover a small amount of business property with limits depending on the type of business that is being insured.
General Liability
This is especially important if clients or customers come to your home. If a client visits your home office, trips on a rug, and gets hurt, your personal liability coverage may deny the claim because it happened during business activity. Home based business liability insurance helps cover legal fees and damages if someone is injured at your home because of your business.
Business Interruption
If a pipe bursts and floods your basement office, you are not just losing a desk or a computer. You may be unable to earn an income while repairs are underway. Business interruption coverage helps replace lost income and can cover ongoing expenses while your workspace is being restored.
Why Your Personal Home Policy Isn’t Enough: The Risks of Working From Home
A lot of Canadians assume that working from home for an employer and running a business from home are basically the same thing. From an insurance standpoint, they are very different, and that difference can leave you improperly insured in the event of a loss.
The Equipment Breakdown Gap
Your home insurance policy may cover a laptop that is stolen in a break in, but it usually does not respond if a power surge burns out your $3,000 3D printer or industrial sewing machine. Standard policies often exclude mechanical or electrical breakdown for business equipment. A home based business endorsement can add Equipment Breakdown Coverage, so you are not paying out of pocket to replace the tools you rely on every day.
The Impact on Your Personal Policy
Not telling your insurer that you run a business from home is viewed as a material change in risk. If there is a fire linked to business equipment or stock you never disclosed, your home insurer could deny the claim or even void the entire policy. Being upfront with your broker protects your coverage, and it also helps them recommend options like home based business liability insurance so your business activity is properly covered.
The Off-Site Blind Spot
Many home-based businesses do not operate only within four walls. Maybe you sell at weekend markets, run workshops at a rented studio, or visit clients at their homes. Personal home insurance is not designed to cover business activities away from your address, so damage to your display, theft of stock from your car, or an injury at an event can easily fall outside your policy and leave you paying the costs yourself.
Frequently Asked Questions (FAQs)
How much does home-based business insurance cost in Canada?
Costs depend on what you do and how much you earn. For low-risk work, like writing or consulting, you can sometimes add insurance for a home-based business to your home policy for around $25 to $50 a year. If you run a higher-risk business, such as a daycare or beauty salon, you may need a separate policy, which often starts at about $1,000 per year.
I’m an employee working from home for a company. Do I need this?
In most cases, no. If you are an employee using a company laptop or equipment, your employer’s commercial policy usually covers those items, often through a floater. It is still a good idea to let your home insurance broker know that you work from home so they can confirm your personal liability is set up properly, especially if you sometimes have work visitors.
Does home based business insurance cover me if I sell products online?
Sometimes. Your policy may cover the stock you keep at home, but you might also need Product Liability Insurance or home based business liability insurance if someone says your product caused an injury.
Not sure if your home-based business is covered? Talk to Keller & Associates Insurance Brokers for clear advice and coverage that fits the way you really work and live in Ontario. Reach out today for a no-pressure conversation and a quick quote so you know your home and business are properly protected.