The rise of digital media has changed the way hundreds of thousands of Canadians work. It’s becoming increasingly common for people to work from home, either part-time or full-time. If you telecommute or operate a home-based business, you may need to later or update your homeowners insurance to properly protect your assets.
Basic home insurance is not designed to cover commercial property and equipment. If you keep and use specialized or expensive equipment in your home as part of your business activities, you should consult your insurance provider to make sure you have the right type of protection in place.
Commercial Liability Limitations
Most standard home insurance policies protect from personal liability in the event that someone is injured on your property. However, such protections are not typically extended to home-based commercial activities. For example, if you have a customer or client come to your home for business reasons and they are injured during their visit, your home insurance policy may not cover your liabilities, and you could be left to face expenses out of pocket if you are sued.
In such cases, the solution is to purchase a general commercial liability policy that covers your home-based business activities. These policies are readily available through brokers and insurance companies, and they form an important part of your commercial coverage strategy.
More Types of Coverage Required by Home-Based Businesses
Here is an overview of the other types of specialized insurance coverage you may need if you run a home-based business:
- Errors and omissions insurance. If your home-based profession demands the preparation and filing of complex contracts and forms, it’s important that you carry errors and omissions insurance. Should you make an error or oversight on a contract or form, you could be subject to a lawsuit, and your home insurance will not provide you with any compensation for damages that may be awarded to the plaintiff in such cases.
- Professional liability insurance. This type of coverage is similar to errors and omissions insurance, but provides a more generalized type of coverage that protects you from a much broader range of professional liabilities. It is recommended if your home-based business requires you to deal personally with customers or clients.
- Product liability insurance. If your home-based business is engaged in the sale, distribution or repair of products that could conceivably cause injury or illness, you should be sure to add product liability insurance to your coverage portfolio.
Protecting Home-Based Business Assets
Many home-based businesses require that you purchase, keep and use specialized equipment in your house — equipment that can be very valuable. In order for these assets to be covered, they must be declared to your insurance company and itemized under your homeowners’ insurance policy or covered under a separate, specialized policy. It’s also crucial that you understand the difference between “actual cash value” and “replacement cost” when protecting specific assets.
In other words, don’t expect the personal property provisions of your standard homeowners’ insurance policy to cover home-based business assets. You may also a commercial policy if you don’t work from home, but regularly store valuable business-related items in your house on a temporary basis.
Practical Tips for Home-Based Workers
Finally, keep these important pieces of advice in mind to limit your risk:
- Maintain a dedicated in-home work space where you keep your business assets, and ensure this area is secure.
- Discourage children and family members from entering your work area without good reason.
- Maintain your property to reduce injury and accident risk for people visiting your home.
Home Insurance Calgary: Get the Right Coverage
It’s important to discuss your business activities with an insurance broker or provider. Doing so ensures that you will be fully aware of all the different types of coverage you need, and it will also help you avoid paying for insurance products you don’t necessarily need.
Some homeowners’ insurance policies will cover certain commercial assets; for example, if you’re an online-based telecommuter and all you really need to work is some common computer equipment, you probably won’t need to purchase supplemental coverage. However, if you’re engaged in complicated and highly specialized activities with legal implications, you may still benefit from errors and omissions insurance, or other types of uniquely designed coverage.
Lane’s Insurance is pleased to offer comprehensive informational resources on a wide range of insurance-related topics, and Lane’s also provides fast, free, no-obligation online quotes for all your insurance needs.
