Do You Need Household or Business Insurance for Your Home-Based Business?

Working from home is just like running a business on a main street. You must conduct yourself in a professional manner when dealing with customers. You must ensure that your products and services are up to the standard your clientele expect. Adding to this, you face the same risks and liabilities as any other company.

You may be aware of the importance of being financially prepared when disaster strikes your business, but you may be confused by what the right product is for you. The styling tools you use for your home hair salon, for example, may already be listed on your Household Insurance policy. But what happens when your tools are stolen or damaged in a fire? What if these tools burn or damage a customer’s hair and you end up getting sued? Will your Household Insurance be enough to cover your losses? Or do you need an additional type of coverage – Business Insurance? Here’s a look at these two types of protection plans and when one — or both — is right for you.

Business insurance may seem like something that only big companies need, but you might be surprised at the extent to which any unexpected event can harm a small company. For this reason, it is important to get adequate cover against key liability risks, which can be especially damaging to small businesses, since they’re not always financially strong enough to survive a client lawsuit.

Every business, even if home-based, should have liability insurance.  This policy financially protects your business in the event a customer is injured on your premises and they decide to sue you for damages. Now, if customers don’t visit your business at home or you run an online business from home – will you be safe from liability? Possibly. But, what if your home catering company is responsible for food poisoning at a wedding? What if your eCommerce website crashes and you’re unable to conduct business for two days? In the case of the latter, business interruption or loss of income cover, which is offered by a Business Insurance policy, may come in handy.

While some household property you also use for business purposes may be insured by a Household Insurance policy, this policy is not going to cover everything that might happen to your tools and equipment. What’s more, in addition to excluding liability cover, most Household Insurance policies also do not cover valuable property taken off the home premises. This means that if you take your laptop with you when meeting a client at a coffee shop and something happens to it, the policy will not pay to replace it, unless it’s specified separately on your policy. If you use your laptop only for business purposes, ensure it is included in your Business Insurance policy in order to be covered. Similarly, if a client enters your home and an incident occurs, you will not be covered by your Household Insurance, but by your Business Insurance policy if the item was specified in the policy.

If you already have Household Insurance when starting a business at home, it’s important to notify your insurance company. Your policy may need to be updated to include new home contents and business-related risks which they think could impact your level of cover and the cost of your policy. Failure to inform your insurance company could lead to problems later if you need to make a claim.

When it comes to safeguarding your assets, it’s best to follow a tried and true motto: prevention is better than cure. But, as this article has shown, Household Insurance is not enough to put you in a comfortable position to set up a home-based business. You will need Business Insurance as well to enjoy peace of mind. This policy can be customised to meet your home business’ unique needs, so if something disastrous happens to your expensive equipment and stock, the insurer is going to help you to quickly recover from your losses.   

Disclaimer: This article is for informational purposes only and should not be construed as financial advice.