Organization has always been a strong suit of mine, and I recently decided to launch a part-time home-based event planning business. Being a stickler for mitigating risk, I naturally decided to research my insurance concerns to see if I would need to close off any possible gaps in my current coverage.
My business idea is fairly simple and straightforward, and since I’m the only principal involved in the venture, it’s going to be fairly easy for me to get the protection I need by extending my homeowners’ insurance. Not surprisingly, more complex home-based businesses demand additional considerations, which should be discussed in detail with a reputable insurance provider.
Simple Businesses Can Be Covered Under Home Insurance
I learned that home-based businesses could be covered under what is known as an “endorsement” in the insurance industry. This extra endorsement can be added to a home insurance policy to protect essentials like computer equipment, supplies, merchandise, documents and books.
In addition to basic material assets, home-based business endorsements also provide coverage for:
- Essential business equipment used for business purposes away from the home. Let’s say I was working from a cafe one morning and someone swiped my laptop while I was in the washroom. My home insurance business endorsement would cover my loss, up to a specified financial limit (which is set when coverage is purchased).
- Losses that threaten business continuity. Suppose we had a fire in the house that destroyed my office and left me scrambling to recover in time to keep my business running. The endorsement would provide some extra money to help me keep the business going, so long as the event that originally disrupted my business was covered under my home insurance.
- Injuries to third parties. If a client attending a business meeting at my home slipped on my walkway and got hurt, my home insurance business endorsement would cover my liability.
Freelance home-based workers and proprietors of home-based businesses that employ only one or two people can generally get the coverage they need through their home insurance policies. However, it’s important to discuss the particulars of the business with an insurance professional to ensure that all business assets and potential liabilities are taken care of.
Who Should Buy Home-Based Business Insurance?
Anyone operating a business with equipment or assets that are not fully protected under standard home insurance policies should purchase extra coverage. I also learned that equipment that would normally be covered under home insurance may not be protected if it’s being used for business purposes.
Here is an overview of the eligibility requirements for a home-based business endorsement:
- The business must be run out of the policy holder’s primary residence
- The business activity meets the insurance company’s requirements; these differ from provider to provider, but exceptions are generally few and far between
- The policy holder has an active home insurance policy
- The policy holder resides in Canada (or any Canadian province or territory where the insurance company operates)
Home Insurance Isn’t Enough for Complex Businesses
While business endorsements will suffice to cover small-scale business activities, other forms of protection are necessary to protect those who operate more complex businesses. For example, certified professionals generally need a type of protection known as errors and omissions insurance (also known as professional liability insurance). This type of coverage protects professionals from claims of negligence, which can arise in numerous professions including law, accounting, healthcare, esthetics, engineering, financial services, consulting, and contracting/construction.
Home-based businesses that involve valuable assets or inventory are best protected by standard business insurance. Business endorsements are usually limited in the amount of coverage they provide, offering a modest level of protection that may not suffice in all cases.
Discuss Your Needs with an Insurance Company that Cares
I know that it’s easy to make mistakes when purchasing insurance, and many people aren’t aware that they are subject to common gaps in coverage and other mistakes. I’m glad InsureMy is there to help me protect everything that’s important to me, and you will be too.