Operating a business out of your home is not anything new, but it has started to become a lot more common than ever before. During the pandemic, a lot of people started new businesses from their home or moved their business to their home instead.
There is a cost savings with operating your business out of your home and no one can deny that. The one thing that could be denied is a home insurance claim if your insurance company does not know you are operating a business out of your property.
Insurance companies have exclusions built into their policies for various possible scenarios such as illegal activity, mold, pests, commercial activities out of the home (your business), and many more.
It is important to know if your home insurance policy has an exclusion for commercial activities because it could void your contract with the insurance company. If your policy were to be cancelled due to misrepresentation – a fancy way of saying that you did not inform them or held back information – then they could deny any claim even if it is not related to the business.
For this reason, it is paramount that you are aware of your policy exclusions and to have your insurance broker walk you through how to make sure you are properly insured.
What Should I Do If I Operate a Business Out of My Home?
The first thing you should do is to contact your insurance broker. They have gone through extensive training to ensure that they can help you through these types of questions. If you do not have a broker now and you live in Ontario, reach out to us to see if we can help.
Your broker will look at your policy to see what options you have depending on the type of business you are operating. You can get very lucky and just be able to put on an endorsement to your current home policy to get the coverage for a minimal premium.
The broker will be able to tell you if you need any other types of coverage as well. Depending on the business you are operating there could be a need for some type of Cyber Insurance, Basic CGL (commercial general liability), or Professional Services (Errors and Omissions)..
Not all businesses are the same and there is no one size fits all answer to business insurance. Your best bet is to get a qualified opinion from a licensed broker.
Home Based Business Endorsements
You can add endorsements on to your home insurance policy that cover some types of businesses. This is the ideal solution if your insurance company offers the endorsement, and your business fits the requirements for the endorsement.
Every insurance company will have different rules, but they will have set limits on the amount of revenue your business can have while operating under the endorsement (you can always switch to a normal commercial policy if it is larger than the limit), the types of businesses that are able to get the endorsement, and many more.
Some home-based businesses will have clients or employees coming to the house and some businesses will just be one person with a computer. Due to the drastic range of possibilities, there will not be a one size fits all solution.
The Final Word
Operating a business out of your home has many advantages. It is important to remember that your home insurance policy most likely has an exclusion for any type of commercial pursuits inside of the home. The company could even deny coverage or cancel a policy if a business has been operating out of the home without their knowledge.
For this reason, it is important to have a qualified licensed insurance broker guide you to ensure that your home, business, and family are properly insured.