Home business insurance

Home business insurance defined

What is home business insurance? Home business insurance is a type of commercial insurance coverage designed to protect policyholders who operate businesses out of their homes or who work from home frequently. Home based business coverage is vital, especially when you consider that most homeowners insurance policies do not cover any losses or damages related to business activities in the house. This means that without home business insurance, you would be vulnerable to risk. If an incident occurred in your home resulting from your business activities, you would be on the hook for the cost of the damages because your home insurance company would not compensate you.

Ultimately, home based business insurance, like any type of commercial or home insurance, is all about protection. This type of insurance can protect employees, entrepreneurs, and more from all kinds of risks. Depending on the policy you choose, your home based business insurance could include commercial property coverage, liability insurance, business equipment insurance, cyber insurance, and much more.

Risks that home businesses face

Home businesses face all kinds of risks, which is what makes home based business insurance so important. A few common risk scenarios that home based businesses may face are as follows:

Your business’s inventory is damaged or stolen

One fire or flood could cause extensive damage to your business’s inventory. Similarly, a break-in could lead to your precious inventory being stolen from your home.

Your business equipment breaks down

If your business uses expensive or specialized equipment and it is damaged by a fire or a flood, or suffers a mechanical or electrical breakdown, your warranty may not cover it. Luckily, most home insurance policies do, especially if you have an equipment breakdown add-on.

A customer accidentally injures themselves while visiting your business

Imagine a customer is visiting your home-based business and accidentally slips and falls on an icy walkway leading into your home. This slip-and-fall accident could end with them suing you for bodily injury. Since they were visiting your home for business purposes, you would only be covered if you have home based business insurance. Standard homeowners insurance likely wouldn’t be adequate.

A client notices a mistake in the work you provided them

Mistakes happen, but they can be costly for businesses. For instance, if a client notices that you made a mistake and it cost them money, they could sue you. A single lawsuit could cost tens of thousands of dollars, with a major one costing upwards of $150,000. Home insurance would not protect you against this in any way, which is why commercial home business insurance is so important.

Please note that the right business insurance policy can protect your home based business from all of the above.

Does standard home insurance cover home businesses?

By now, you’ve likely caught on that standard home insurance does not typically cover businesses - and this is true. Unless you purchase a commercial coverage add-on, rider, or endorsement, your homeowners insurance policy is unlikely to compensate you in the event of damages or losses related to your home business. More specifically, you should not expect your home insurance policy to cover you in the following situations:

• If a customer or client brings a claim against you and your home based business
• If a product you sell or manufacture causes bodily injury or property damage to a third party
• If your business inventory gets damaged or stolen
• If business equipment gets damaged or stolen
• If a piece of business equipment results in a fire or other peril
• If your business is forced to close temporarily following an unexpected incident
• If a customer, client, or visitor injures themselves when visiting your home based business
• If you damage someone else’s personal property in the course of your business operations

Please note that all home insurance policies are different and coverage varies between providers. Therefore, to confirm exactly what risks your home insurance policy does and does not protect against, we recommend reaching out to a broker. A BrokerLink insurance advisor, with both business and home insurance expertise, can review your policy and confirm whether your policy offers protection against business-related incidents, and if so, what the limitations of that coverage are.

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Home-based business insurance coverage

At this point, you have a better idea of how home insurance does not provide adequate coverage for home based businesses. Therefore, you are likely curious to know what coverage home based business insurance companies offer. Below is a breakdown of some of the most common insurance coverages available to home based businesses in Canada. From professional liability insurance and cyber insurance for businesses to commercial property insurance and business interruption insurance, keep reading to learn about coverage for home based online businesses:

Professional liability insurance

Professional liability insurance, which is also referred to as errors and omissions insurance, is a type of liability insurance for businesses that can protect them against claims of negligence, misconduct, error, or failure to deliver a service as promised. Professional liability insurance is crucial for any home based business in which the business owner or employees provide advice or service for a fee. Under this portion of your commercial insurance policy, you can be compensated for the cost of legal fees, including defence and settlement fees, if such a claim is brought against your business. Depending on your profession or the industry you operate within, professional liability insurance might be required.

Cyber insurance

If you want protection from cyber threats when working from home, cyber insurance is a must. This is a type of insurance that can protect businesses of all kinds from the threat of cyber attacks, hacks, or data breaches. If you store sensitive information online, whether internal information about your business or customer information, such as financial or personal information, cyber insurance is extremely important. It is also important if your business uses online scheduling or meeting tools, like Zoom, MindBody, Asana, Google Meet, etc. This type of coverage can compensate home based businesses for the costs associated with a cyber incident, like legal fees, credit monitoring, client notifications, and more.

Commercial general liability insurance

Commercial general liability insurance is a core component of any commercial home business insurance policy. It is sometimes referred to as “slip and fall insurance,” and it is intended to protect policyholders against third party claims alleging property damage or bodily injury. For instance, if a client visited your home and accidentally slipped and fell, injuring themselves in the process, they could sue you. In this instance, you would be reimbursed for the cost of legal fees, medical expenses, and more under the commercial general liability insurance portion of your home business policy. This type of liability insurance can also cover the cost of repairs if a property damage claim is brought against your business.

Product liability insurance

Product liability insurance is a branch of commercial general liability insurance and is important for all businesses that sell products. With this type of coverage, if a product you sell, distribute, or manufacture results in bodily injury or property damage, you would be covered. Please note that you could be held liable for the damage, whether you manufactured the product in question or not, which is why this coverage is so important. Product liability insurance covers a wide range of products, including food and beverage. For instance, if you own a coffee shop and a customer claims that a muffin they bought from your coffee shop gave them food positioning, they could sue you for bodily injury. Under this portion of your policy, your insurance provider may reimburse you for any applicable medical expenses or legal fees. Product liability insurance may also cover damages caused by design, marketing, and manufacturing defects.

Commercial property insurance

Commercial property insurance is another core element of home business insurance, along with commercial general liability insurance. Where the latter protects against liability claims, the former is designed to protect your physical place of business against property damage. The specific types of damages that your business will be protected against depend on the perils named in your policy. Commonly named perils include theft, fire, wind, vandalism, etc. Please note that commercial property insurance coverage doesn’t just stop at the home office you operate out of, it also protects business-related contents, like inventory or stock, business equipment, and electronics.

Equipment breakdown insurance

Equipment breakdown insurance is important for any home based business that uses specialized equipment. Industrial-grade machines will only be covered by commercial property coverage if the damage is caused by an insured peril. Meanwhile, equipment breakdown coverage protects against mechanical or electrical breakdowns. So if such an incident occurs, your insurer may cover the cost of repairing or replacing the broken piece of equipment. You may also be reimbursed for any lost income as a result of the broken down equipment.

Business interruption insurance

Business interruption insurance can provide peace of mind to many business owners in Canada. If damage due to a named peril occurs, and you are forced to temporarily close up shop as a result, your insurance company might compensate you for any lost revenue or additional expenses incurred due to the shut down. Business interruption coverage can even reimburse you for employee wages that you are still required to pay even if your business is temporarily closed.

Commercial auto insurance

Finally, commercial auto insurance is an important form of commercial coverage for many types of Canadian businesses, including home based businesses. Commercial auto insurance is a legal requirement if your business uses a vehicle or multiple vehicles for business purposes, such as transporting materials, visiting clients, or delivering items. It doesn’t matter what type of vehicle you use, whether it be a single delivery van or a fleet of trucks, if you use a car for your business, you will need to purchase commercial car insurance. Commercial car insurance coverage varies by province but typically includes third party liability coverage, accident benefits coverage, uninsured automobile coverage, and direct compensation - property damage coverage. You can also add optional coverage like comprehensive or collision coverage for added peace of mind.

The cost of home business insurance

The cost of home business insurance varies significantly. This is because commercial insurance providers consider many factors when calculating rates. Since all businesses are different, all premiums are different too. Some of the factors that an insurer will use to determine the cost of your home business insurance policy are as follows:

• The annual and projected revenue of your home business
• The number of people employed by your home business
• The industry your home business operates within
• The services and products offered by your home business
• Your training and years of experience in the industry
• Your personal insurance claims history
• The coverages, deductibles, and limits you choose to include with your policy

Expert tips to find the right business insurance for your home business

Find the right home business insurance policy by following the tips below:

Shop around for the best coverage

Insurance professionals always recommend shopping around to find the right coverage for your home business. In other words, don’t type “home business insurance” into Google and buy a policy from the first result that pops up. Finding the right coverage is about comparing policies. This can be tedious, which is why we recommend enlisting the help of a broker who can do this for you. For example, here at BrokerLink, one of our licenced commercial insurance specialists will compare coverages and prices to determine the best policy at the most affordable price for your home based business.

Have a broker explain your policy to you

Understanding an insurance policy is no easy task. With so much complicated industry jargon, it’s best to have a professional walk you through it. That is why we suggest contacting a broker. A BrokerLink insurance advisor will be happy to explain your policy from cover to cover. They can answer any questions you may have and make you aware of any exclusions. Knowing the terms and conditions of your home business insurance plan can save you a lot of time, money, and stress down the line.

Ask about bundling insurance policies

If your home business is on a tight budget, consider bundling insurance policies. This is a great way to save money. In fact, insurance bundling can save you between 15% and 20% on each policy. The catch is that you need to purchase more than one insurance product at once. However, the insurance products don’t have to be the same. This means that you could purchase one personal auto insurance policy + one home business insurance policy, or one home business insurance policy and one personal insurance policy. The options are endless. Contact BrokerLink to learn more about how insurance bundling works.

Review your home business insurance coverage before it expires

The insurance needs of your home based business are likely to change as time goes on. Therefore, we never recommend automatically renewing your coverage without reviewing it. Keep in mind that what made sense for your business last year might not make sense this year. For example, if it’s grown significantly, then higher coverage limits or additional coverage might be required. If you want a professional opinion on whether to renew your current policy, update it, or find a new one, don’t hesitate to reach out to BrokerLink.

Minimize risk by implementing a risk management strategy

Risk management is important for any business, but it is especially important for insurance purposes. An effective risk management strategy can reduce the odds of an incident occurring, which in turns translates to fewer claims and cheaper rates. To save money on your home business insurance in the long run, make sure to implement a risk management plan.

Enlist the help of a home business insurance specialist from BrokerLink

If you are considering buying home business insurance, our last piece of advice is to consult with a home business insurance specialist from BrokerLink. There are several reasons why you need a broker for home insurance and business insurance, and that’s because a broker can compare policies to find you a great plan and offer objective advice on the best coverage for your business.

BrokerLink can help you find the right coverage for your home business

BrokerLink is a full-service insurance brokerage, with expertise in both home insurance and business insurance. We combine this knowledge to offer the best possible services to owners of home based businesses. Whether you need help deciding on which coverage is right for your home based business, tips for working from home, or advice on separating your personal and work life, the BrokerLink team is here. One of our licenced insurance advisors would be pleased to recommend coverage, provide you with a free home business insurance quote, or help with tasks like renewing business insurance or purchasing a new policy. Get in touch today to learn more about the flexible and dynamic insurance solutions we can offer home business owners in Canada. BrokerLink can be reached by phone, email, or in person at any one of our Canadian locations.

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FAQs on home business insurance in Canada

If you have any questions, contact one of our local branches.