Why your home-based business isn't covered by your home insurance

More than one in every two businesses in the UK are based from home yet up to 60% of those are not insured correctly as standard homeowner policies to not cover home-based businesses. As more and more people continue to become self-employed and the number of people working from home has increased. However, if you do not insure your business correctly then you can risk not being covered should an incident occur.

Domestic home insurance does not protect a home-based business and it is important to protect your home and avoid any risk of theft, damage or loss. If relevant, an ‘all-risks’ home business policy would also ensure that you are covered from any loss, damage or theft to equipment that occurs outside of the home, such as when you are travelling to meet a customer.

Firstly, your buildings and contents cover would not be the same as that for your standard home insurance policy. You may have office equipment, furniture, stock or business records and data that need to be valued and covered separately. Business contents insurance is going to be different to that of a standard home even when you aren’t working out of a fully-fledged home office.

Things to consider:

Will people need to visit your home?

Perhaps you have regular visitors to your home in relation to business, meaning that your home and your contents will be at higher risk. A general or public liability insurance would be needed in addition to normal home insurance to cover you against possible damages you would need to pay should someone suffer injury or even have their property damaged whilst visiting your home for business purposes.

There is a high risk of such injuries occurring due to anything as simple as slipping up on a wet floor, or perhaps you run a photography studio from your home and a client trips on a lead. Compensation for such scenarios can run into claims for thousands of pounds which as a small home-based business you are unlikely to be able to support without business insurance.

Will you be taking on staff?

Are you ready to expand and employ someone for your home-based business? In the UK, you would legally need Employer’s Liability Insurance if you employ anyone to work for your business from your home. In the US, this is called Worker’s Compensation Insurance. This will protect against any possible illness or accidents to staff members as a result of working for you.

Does your business offer professional services and advice?

If you offer a consultancy-based service then you may also want to consider adding professional liability insurance, otherwise known as errors and omissions (E&O) insurance, to your home business insurance policy.

Poor advice or claims of negligence can work against you and without this form of insurance clients are open to seeking compensation for anything from a bad beauty salon experience to poor financial advice or faulty computer repairs.

There are also a few occupations where professional liability insurance is required by the client before they are happy going into business with you.

Do you need your vehicle for business use?

What’s more, if you are using your vehicle for home-based business activities then you will need to ensure that you have appropriate business vehicle insurance in place. If an accident was to occur and you were using your vehicle for business purposes without the appropriate insurance you will unfortunately find yourself without cover.