Insurance for home-based businesses
Running your business from home has many advantages: flexible working hours, lower overhead costs, and the opportunity to swap a long commute for a better work/life balance.
However, when it comes to insuring your business, most home-based business owners make the mistake of assuming their home insurance covers their business activities. The reality is, most homeowner’s policies exclude business-related claims. In some cases, your policy could even be void if your provider is unaware that you are conducting business from home.
At Zensurance, we know what makes your business unique. With over fifty partners, we’ve helped more than 150,000 entrepreneurs protect their businesses with insurance policies customized to cover industry-specific risks.
Our mission is to make insurance as accessible as possible. We wrote this guide to help you navigate the basics of liability insurance for your home-based business.
What is home based business insurance?
Your homeowner policy is unlikely to provide coverage for any loss or damages resulting from business-related activities, leaving your business exposed to a significant amount of risk.
Specifically designed with entrepreneurs in mind, our home business insurance policy package protects against risks associated with operating a business out of your home, such as negligence or third-party injuries, across industries.
What does it cover?
Different businesses have different risks; for example, a financial consultant won’t require the same type of coverage as an e-commerce company.
A comprehensive policy for your home-based business should cover the risks you are most likely to face. Those risks will vary by service, industry, and product; however, the following core coverages apply to most business owners:
- Professional Liability Insurance, also known as Errors and Omissions Insurance, protects against claims alleging negligence, misconduct, or failure to deliver a service as promised. Professional Liability Insurance is essential for any business owner offering advice or service for a fee. It may provide legal expense coverage in the event of financial loss due to your negligence. For some professions (e.g., accountants, paralegals), Professional Liability Insurance is required to practice. All of our policies are association-approved.
- Cyber Liability Insurance: According to a report published by the FBI, cybercrime has increased by 400% since the onset of COVID-19, with small businesses increasingly targeted. It is a critical component of your risk management strategy, especially if you plan on using web conferencing tools (e.g., Zoom, Google Meet), scheduling software (e.g., MindBody, JaneApp), or store personal client information. Cyber Liability Insurance could provide coverage for costs associated with cybercrime involving your technology systems and customer data. If your data is compromised due to a cyber-attack (e.g., phishing, hacking), Cyber Liability Insurance provides coverage for notification costs, legal expenses, and risk management fees.
- Commercial General Liability Insurance, also known as ‘slip-and-fall’ insurance, protects against claims alleging third-party property damage or bodily injuries. It may seem like an unnecessary form of coverage, considering you conduct business from home, but consider the delivery person who causes property damage at a customer’s home or the client who slips on your steps while visiting. CGL may provide financial coverage for both medical and legal fees if you or your business are named in a lawsuit.
- Product Liability Insurance: Often included in CGL policies, Product Liability Insurance provides coverage for property damage or bodily injury due to a product you sell, manufacture, or distribute. For example, you operate a micro-bakery from your home kitchen, and a client sues you claiming a cake you sold them caused food poisoning. Product Liability Insurance typically covers damages caused by design, manufacturing, and marketing defects. If you plan to sell your products online or ship outside of Canada, be sure to check with your broker to see which areas are covered by your policy, as additional coverage may be necessary.
- Commercial Property Insurance: Much like CGL, it may not occur to business owners operating from home that they need Commercial Property coverage (home business contents insurance). After all, isn’t that why you have home insurance? Most home insurance policies don’t cover damage, loss, or accidents due to business-related activities. For example, if your laptop is stolen, it may not be covered as home insurance typically excludes business property. Commercial Property Insurance doesn’t just protect a physical location; it protects your business’s most critical physical assets, including equipment, technology, stock, and inventory. Most home insurance policies don’t cover business-related claims, making Commercial Property Insurance crucial for your home and business.
Please note, you must inform your insurance provider if you have pivoted to working from home. If your house burns down and you didn’t alert your insurance broker that you were using your home for business purposes, you may find your home coverage void.
- Equipment Breakdown Insurance: From computers to industrial-grade machines, Equipment Breakdown Insurance covers the cost of repairing or replacing equipment damaged due to an electrical or mechanical breakdown. Not to be confused with Commercial Property Insurance, which covers loss or damage due to an insured event (e.g., fire, theft).
How much does it cost?
On average, a small business owner operating in Ontario can anticipate premiums starting at $450 annually for liability insurance with a $2M limit.
Insurance companies consider several factors when determining your premium, including:
- Annual and Projected Revenue
- Industry and Profession
- Services and Products Offered
- Training and Years of Experience
- Claims History
We’ve partnered with over fifty insurance providers to offer you different options that suit your business needs at the best price.
With mandatory stay-at-home orders and social distancing requirements, it is no surprise that entrepreneurship rates increased over the past year. However, for those who transitioned to a home-based business due to COVID-19, it is highly recommended that you alert your broker and review your existing insurance policies to ensure they cover your current work environment. As mentioned, not updating your broker could negatively impact your business. Should you or your company be named in a claim or lawsuit related, your homeowner’s policy will most likely not provide coverage.
A note for business property owners (renting or leasing), most business insurance policies limit coverage for premises left vacant or unoccupied for more than 30 days. If you have had to close your location due to COVID-19, your broker can help you determine what actions to take to ensure you have coverage.
Frequently asked questions