Most of the world’s greatest business started in someone’s basement or garage. It’s not uncommon for entrepreneurs to get their start out of their home. Your home business is also a great way to find work-life balance when you have a lot going on with small children or aging parents.
There is a lot of confusion around what your home/property insurance policy will cover for your home-based business, and (more importantly) what it won’t. With many having to find new ways to operate their home-based business, we thought we would talk about some of the important insurance coverage you should have for your business.
Commercial General Liability (CGL)
Unfortunately, accidents happen. Commercial General Liability is designed to protect you from the financial repercussions if your business has been deemed legally responsible for injuries caused to another person, or damage to their property.
If your business has clients or visitors that come to your home, or if you or a staff member go to your client’s home to sell or perform a physical service (such as hair dressing, brick masonry or woodworking) – you should have a CGL.
Your home insurance policy is responsible for providing coverage for the contents of your home for personal use. When you set up or renew your policy, you and your broker should be having conversations about how much it would cost to replace everything you own in your home. That value is what is noted on your insurance under the Personal Property section.
While your home insurance policy may provide a small amount of coverage for the contents of your home-based business, it is usually not sufficient. Think about how much inventory and equipment you have. How much would it cost you to replace every item if it were destroyed?
To protect your business equipment and inventory against situations such as fire, water damage or theft, you’ll need commercial contents coverage.
Commercial Auto Insurance
Just as your home insurance policy protects your personal contents, your auto insurance policy is designed to protect you when you are driving your car for personal use (such as recreation or commuting). If you are using your personal car for work-related activities (such as deliveries or mobile repairs), then your personal auto insurance will not cover your losses.
Commercial vehicles are typically covered for higher liability limits, because a business can be sued for more money than an individual if you were to injure someone or damage someone’s property. The best way that you can protect yourself and your business, is to carry a commercial auto insurance policy if you are using your vehicle for commercial purposes.
Errors and Omissions Insurance
This one applies if you are in the business of providing professional advice (such as accounting, law, insurance or engineering). If you give a client advice that is wrong, or provide substandard recommendations, and the client or their business suffers as a result, your Errors and Omissions insurance responds. It will generally cover damages and the legal defense costs.
If you have a home-based business, you need to have a discussion with your insurance broker about what coverage is right for you. You also have an obligation to let your insurance company know if you start a business in the home, as that may pose different risks to your property. Let’s have a conversation to make sure that you are properly protected!