Your home may be where you lay your head at night, but is it also where you work? When your workplace is also your home-base then you might be under the mistaken belief that your business is insured under the liability and contents coverage you have with your home insurance policy; it's not, unless your home insurer knows you operate a business out of your home.
A recent study released by the Insurance Bureau of Canada (IBC) suggests that 39 per cent of Canadians who operate a home-based business do not have insurance coverage that specifically addresses the special needs of a business.
Are you in this group? Consider commercial property and general liability coverage designed especially with your home-based business in mind.
Consider the scenario provided by the IBC's "Know your stuff" campaign designed to educate Canadians when it comes to home, car and business insurance. For those 39%--who do not have a beefed up home policy that includes coverage for their business, or a separate business insurance policy--the following is an adaptation of a scenario provided by the IBC, of what might happen if you assume your home insurance policy will cover your home-based business activities:
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Let's say, out of your home, you work as a retail products distributor (maybe you work for Tupperware® or Mary Kay Cosmetics®.) What you sell really doesn't matter; it could be cosmetics, household cleaning products, food storage containers, or candles.
Theft
What if while you're out delivering your orders someone breaks into your car and steals the items you were to deliver? The theft would not be covered under your auto insurance policy, because theft of contents from a vehicle is typically covered under your home or tenant's insurance. And it won't be covered through your home or tenant's insurance, because the product is related to a business your policy doesn't cover because your insurer didn't know you ran a business out of your home.
Injury
Now consider the courier company employee that comes to your home to deliver your product, or other business-related material. What if he or she slips and falls, suffers a terrible injury and sues you? Will the liability portion of your home insurance policy protect you? No. The injury was the direct result of a business-related activity and therefore, will not likely be covered under your personal home insurance policy. But that doesn't mean you won't have to pay. The courier employee can still pursue you for compensation through the courts. Without proper business liability insurance, you could be ruined financially if the courts find you legally liable for the courier's injuries.
And what if one of the products you sell causes injury to a consumer? That consumer can sue the product manufacturer for compensation, but you would also be liable as the distributor.
Fire
A house fire could also have devastating consequences for you. If everything related to the business is lost - all your product, computer equipment, office furniture, records, etc. - there's a chance none of it will be covered under your home insurance policy. What's more, if you have not disclosed the existence of the home-based business to your insurance company, your home insurance policy may be voided resulting in the potential that none of your loss will be covered.
While some people don't realize their home insurer needs to know in advance that they run a business out of their home, there are others who think they're saving money by not doing so. All Canadians who operate a home-based business should have insurance that helps to protect everything you are working so hard to achieve; and that's where a commercial insurance policy can help.
While an extension on your home insurance policy to include your business is better then no coverage at all, it's kind of like trying to fit a square peg into a round hole. A business insurance policy that includes commercial property and general liability insurance is really the way to go. The policy, and how much and what it covers, is designed specifically with your home-based business in mind.
Business insurance, like commercial property and general liability isn't just for businesses that operate out of a storefront; it's for home-based business owners too. In fact, perhaps it's more important for home-based business owners since this is after all where you lay your head down at night.
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