Running your small business from home can be a thing of beauty. You could be reading this article while adorned in your PJs while the rest of us suffer in work attire that is not really as comfy as those salespeople tell us they are. It’s also likely you have a flexible schedule and don’t waste hours on a commute. We both admire and despise you for every last perk working from home affords you.
However, one of the perils of running your small business from home is that it presents an insurance quandary — is home and contents insurance enough, or do you require specific business insurance cover? Well, the answer to that will depend on a variety of things, all of which will likely be different from one home-operated small business to the next. Let’s have a look at these factors so you can make the right decision for you.
When will home and contents cover be enough?
The answer to this question will depend on a few things. Firstly, most (but not all) combined home and contents insurance policies will provide cover for tools of the trade and home office equipment to some degree — that degree being up to a certain monetary amount. This means that if your home is affected by a fire or some other type of natural disaster, or if the washing machine overflows and your work-related equipment finds itself underwater, you’ll be covered up to a certain amount.
The monetary figure will vary from policy to policy, so have a look at your existing home and contents insurance policy and see what you are covered for. Is that enough given the volume and value of any work-related equipment you have in your home? It’s worth noting that the monetary figure in question here is typically not as extensive in a home and contents policy as that of a business-specific policy.
To be on the safe side, it would be worth your while getting any home office equipment and tools of the trade professionally valued, because chances are it’s worth more than you think. And if it’s worth more than your own estimate, it’s entirely possible home and contents insurance isn’t going to cut the mustard and you’ll need to explore other insurance options.
Of course, if your home and contents policy doesn’t provide any cover for business-related items, then it’s definitely not going to be an option for you. If that’s the case, consider a home and contents policy with an insurer who will cover you for your work equipment or move onto other insurance options.
What about stock? Is that covered on a home and contents policy?
A big thing to note is that most home and contents policies will not cover you for stock. So, if your home-run business involves selling of goods that you store at your home, a plain-old home and contents policy will be of zero help to you if your stock is lost, stolen or damaged.
What other types of risks are usually not covered for my business in a home and contents policy?
Aside from tools of the trade and home office equipment being capped at a lower figure (if they are, indeed, included) and stock typically not being covered, home and contents insurance policies do have other coverage shortcomings that don’t fall into the tangible category.
For example, home and contents policies won’t generally — there can be exceptions in some circumstances — cover you for the following business-related insurances:
- Business interruption
- Accidental injury
- Equipment breakdown
- Income protection
- General property (for portable items like your phone, iPad or laptop)
- Tax audit
Also not covered are any of the insurances that are required by law depending on the nature of your business. These include public liability, workers compensation and third-party personal injury insurance.
Things would be much simpler if there was a dedicated home-based business insurance policy
You are so right about that — and you’re in luck, because there are insurance companies that do offer coverage specifically for those who run their businesses from home. These policies will cover you for a wide range of business-related concerns all in the one nifty policy (except, usually, for workers compensation insurance). So, have a shop around or chat to a trusted insurance adviser (one who is not affiliated with any particular insurer) and see if there is a policy out there that is right for you.
In general, though, if you do run your business from home, it’s a good idea to have a chat to a business or insurance adviser to weigh up your options and make sure you aren’t exposing yourself to any unnecessary risk, as well as to be sure that if something does go wrong, your business won’t be adversely affected.
source: ANZIIF Know Risk newsletter