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The home-working revolution has been brilliant for many small business owners.
Whether you’re juggling work and your family life, fitting a part-time business around another job or just looking to save on the cost of business premises, hustling from home is supposed to make your life easier.
But what would happen if something were to go wrong with your home business? While you’re busy looking out for your customers, who’s looking out for you?
We know that in these difficult times, small business owners have plenty to be worried about already, which is why home business insurance is so important. If nothing else, insuring your home business should give you some peace of mind and help you sleep a little more soundly at night.
The good news is that whether you run a cake business, tutoring business or dropshipping business from home, the right package of home business insurance policies can protect you, your property and your business. Read on to learn more.
Do I need insurance if I run my business from home?
Just because you run your small business from home doesn’t mean you don’t need the proper insurance for your business. Similarly, you shouldn’t think that just because you’re self-employed, business insurance isn’t for you.
No matter what kind of business you run, insurance can help protect your livelihood – and if you employ anyone, taking out the right insurance is a legal requirement.
You should also know that if you see clients at your home, or do anything other than computer work, there’s a good chance your home business activities won’t be covered by your existing home insurance policy.
In all cases, the best way to protect your home business from mishaps and accidents is by taking out dedicated insurance for your business.
In the meantime, if you have questions about your existing cover, it’s best to check directly with your home insurance provider to find out exactly where you stand. (While you’re at it, you should also notify them that you’ll be working from home, as this can affect your chances of making a claim.)
» MORE: Compare business insurance
What is home business insurance?
Home business insurance is a catch-all term for a package of cover designed to protect you and your home business in case something goes wrong. This can include injuries to you or your clients, theft or damage to stock kept at home, as well as cover if you were forced to stop trading for a period of time.
As with most insurance policies, a home business insurance package can be tailored to your specific needs, so you can cover what you think is most important and only pay for what you need.
» MORE: What is business insurance?
What insurance do I need for my home-based business?
Public liability insurance
A key part of many home business insurance packages is public liability insurance.
Public liability insurance provides cover in the event that a client or member of the public claims they have been injured or have suffered damage to their property as a result of your business activities.
If someone were to sue you for hurting them or damaging their property, public liability insurance could provide financial protection for your home business.
At first thought, you might assume that public liability insurance isn’t necessary for a home-based business, since you are likely to have fewer interactions with members of the public than if you had a physical business premises.
However, if a client were to come round to your home and get injured, public liability insurance could cover your legal fees if they make a claim against you – as well as compensation costs if they win. The same goes for if you ever have to visit anyone on business.
» MORE: Public liability insurance explained
Product liability insurance
In a similar vein, product liability insurance could protect you and your home business if a client makes a claim because they believe they have suffered an injury or illness from any product (or its packaging) which you have manufactured, supplied, sold or given away.
As with public liability insurance, product liability insurance can cover your legal fees and compensation costs in the event that something goes wrong with a product connected to your business.
For the avoidance of doubt, you don’t have to be the original manufacturer of a faulty product to face a liability claim.
If someone is hurt by a product, you could still be legally liable, regardless of where you sit in the product’s supply chain.
» MORE: Product liability insurance explained
Professional indemnity insurance
In many professions, your clients are relying on your advice or specialist expertise.
For example, if you’re a consultant and you work from home, clients will make decisions based on your professional opinion. If you were to make a mistake that results in your client losing out financially, they may raise a claim against you for professional negligence.
Professional indemnity insurance could pay out for your legal costs to fight the claim, as well as covering any compensation your client may be owed.
Business equipment and tools cover
If you’re working from home, you may end up keeping business-related equipment in your house – things like computers, printers and phones.
If it’s all for business use, it’s likely that the equipment in your home office won’t be covered under your home contents insurance.
Depending on the type of business you run, you may want to consider dedicated business equipment cover or tools insurance, which can pay out for repairs or replacements in case of damage or theft.
Stock stored at your home for business use is also unlikely to be covered by your home insurance, so you may want to think about additional stock insurance or business contents insurance for this. That way, you can be sure that your livelihood will be financially protected in the event that something goes wrong.
Business interruption insurance
If your business is suddenly forced to stop trading for an unexpected reason, such as flooding or fire or the breakdown of essential equipment, you could face weeks or months without income.
And if you’re self-employed full-time, this could spell disaster.
Business interruption insurance can cover some of the lost income if your business has to stop trading for a period of time, making it a useful addition to any suite of home business insurance policies.
Personal accident cover
Similarly, if you were to injure yourself at work or elsewhere, you could be left unable to work. That could have dire consequences for your business and, in turn, your own finances.
Personal accident cover is there to provide financial protection and peace of mind if an accident puts you out of commission.
Your personal accident insurance could pay you a weekly amount or lump sum that could help to cover some of the lost income during the time you’re out of work because of an injury.
In the event of a permanent injury, personal accident insurance could provide help with medical expenses and retraining costs. In the event of your death, your beneficiaries could receive a lump sum.
Cyber insurance
Nowadays, almost every business has some connection with the digital world. So it’s sadly not surprising that in the last year, half of UK businesses reported falling victim to a cyber attack.
The bad news is that this is a danger which can affect businesses of every size. You really don’t need to be a major multinational to be targeted by cyber criminals, with small home businesses also in the crosshairs.
The good news is that with the right insurance and digital protections, you can take steps to safeguard your business.
If a major part of your business is based online – for example, if you trade through a website or store customer data securely in the cloud – you may want to consider cyber insurance.
In the event of a cyber attack, cyber insurance could pay out for data retrieval, ransom negotiations, security fixes and plenty more besides. Basically, a good policy will cover the cost of stopping the attack, repairing the damage and getting you back trading again.
» MORE: Everything you need to know about cyber attacks
Employers’ liability insurance
If you employ anyone, whether it’s just one casual worker or a team of 20, you need to take out employers’ liability insurance. It’s a legal requirement in the UK, and you could be fined £2,500 for each day you don’t have it. The only exceptions to this are if you employ your immediate family or someone who’s working outside the UK.
Regardless of whether you run your business from home or from a swanky office, if you employ anyone in the UK who isn’t an immediate relative, this is the one insurance policy you’re legally required to have.
» MORE: Business insurance costs
Do employees need home business insurance?
The insurance situation is a little different if you work from home as an employee rather than as self-employed business owner or side-hustler.
Though it’s a good idea to tell your home insurance company that you work from home, it’s unlikely you’ll need to take out a separate business policy if you’re employed doing office-type work.
If the equipment you use for work (such as a laptop) is provided by your company, you likely won’t need specific insurance for it as it will be covered by your employer’s policy. But if you buy any equipment yourself, you might need to tell your home insurer.
The same goes for if clients of the business visit you at your home or if your employer makes, sells or stores goods at your home.
In all cases, it’s worth checking with your employer or your insurer if you’re unsure.
» MORE: Do I need business insurance?
How much cover should I have?
How much home business insurance you need for your business is going to depend on your specific circumstances. Home business insurance packages can be adapted to suit your needs, so you can often change the level of cover you want.
The only specific limit is with employers’ liability insurance, where you legally need at least £5 million of cover provided by an insurer authorised by the Financial Conduct Authority (FCA).
In addition, certain professional bodies set minimum insurance limits for their members. If you belong to a professional body, check for any insurance policies and limits that are required as a condition of membership and make sure you at least meet those requirements.
Given the hidden costs of working from home, it’s important to make sure you get the best home business insurance deal for you and your small business.
Making sure you have the right level of cover could help keep the costs of your home business insurance down.
Is my home insurance enough?
Home insurance alone is unlikely to cover you for business-related claims. It is a good idea to look into a separate business insurance policy if you want to take out cover for your home business.
That said, you may be able to get extended home insurance that allows for certain business activities to take place at home. Either way, it’s worth talking to an insurer for more details about this so you can make an informed decision.
» MORE: Different types of business insurance
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by Henry Williams