Typically, liability is the greatest risk any home-based business faces. Most homeowner policies exclude business-related claims. In some cases, your home policy could be cancelled or void if your insurer is unaware that you are running a business from home.
- According to Statistics Canada, small businesses made up 98 per cent of all employer businesses in Canada in 2020.
- Many factors come into play when determining the types of coverage your home-based business needs, including the type of business, where you are located, the products and services you provide, and your annual revenue.
- The average annual premium a home-based business owner can expect to pay is around $500 for a policy that provides up to $2 million of liability coverage.
With the onset of the COVID-19 pandemic in Canada in early 2020, and the public health restrictions introduced to help prevent the spread of the virus, thousands of Canadian workers found themselves in the unenviable position of losing their jobs. However, it also has spurred a new era in entrepreneurship in this country. One report estimates 2 million Canadians started a business during the pandemic, with four out of five of those new ventures planning to sell products or services online.
In many ways, small and home-based businesses are the backbone of the Canadian economy. According to Statistics Canada, small businesses made up 98 per cent of all employer businesses in Canada in 2020, employing 9.7 million people (64 per cent of the country’s labour force).
It takes a lot of focus, preparation, and tenacity to launch a home-based business successfully. One of the critical aspects that should figure into your plans is ensuring your new enterprise is adequately insured.
Typically, liability is the most significant risk any home-based business faces. A home, condo, or tenant insurance policy covers residential properties for unexpected events such as fire. However, a home policy may offer a limited amount of coverage for tools and equipment related to your profession, it does not include the types of coverages that are designed for a business. Furthermore, most homeowner policies exclude business-related liability claims. In some cases, your home policy could be void if your insurer is unaware that you are running a business from home.
What kind of insurance does your home business need?
Many factors come into play when determining the coverage your home-based business insurance needs, including the type of business, where you are located, the products and services you provide, and annual revenues.
In general, there are six essential types of insurance any small or home-based business should consider, including:
- Professional Liability Insurance. Also called Errors and Omissions (E&O) insurance, this coverage protects business owners against claims alleging negligence, misconduct, or failure to deliver a service. If your home-based venture involves giving advice or providing a service for a fee, professional liability coverage is vital. It may also include legal expense coverage should one of your clients experience a financial loss due to your negligence and they decide to sue.
- Cyber Liability Insurance. Undoubtedly, cyber liability coverage is a must-have in our increasingly digital world, particularly for e-commerce and startups conducting online financial transactions and storing customer data. Contrary to popular belief, small businesses are a big target for hackers. A survey by the Canadian Federation of Independent Business found almost 61,000 small and mid-sized businesses were victims of cyberfraud in 2020. Cyber liability insurance is designed to cover the costs associated with cybercrime involving your systems and customer data. For example, your data is compromised because of a cyber-attack such as phishing or malware. Cyber liability provides coverage for notification costs, legal expenses, and risk management fees and in some cases public relations help.
- Commercial General Liability Insurance. Commonly referred to as ‘slip-and-fall’ insurance, commercial general liability (CGL) protects you against claims alleging third-party property damage or bodily injuries. For instance, if a courier delivering your product to a customer accidentally damages their property, or one of your customers visits your home and is injured while on the premises, CGL is designed to provide financial coverage for both medical and legal fees if you and your business are named in a lawsuit.
- Product Liability Insurance. Product liability coverage is often included in CGL insurance. It provides coverage for property damage or bodily injury claims arising from a product you sell, manufacture, or distribute. So, if you make or sell food or clothing online and one of your customers sues you for damages because of food poisoning or defective clothing, product liability insurance may cover you for those expenses.
- Commercial Property Insurance. If you’re running a home-based business, then you need commercial property or home business contents insurance. Your home insurance policy may not cover the cost of a stolen laptop you use for your company, for instance. Commercial property coverage protects both your dwelling and your business’s physical assets, including your computer, any equipment you use, as well as your inventory because of damage from an insured event such as a fire or theft.
- Equipment Breakdown Insurance. Whether you’re using computers or industrial-grade equipment as part of your business, equipment breakdown coverage is designed to pay for the cost of repairing or replacing those machines if damaged by an electrical or mechanical malfunction.
Where to get a home-based insurance policy at an affordable price
No two home-based businesses are identical, and neither are home-based insurance policies. However, the average annual premium a home-based business owner can expect to pay is around $500 for a policy that provides up to $2 million of liability coverage. Getting a free business insurance quote can give you more insight into what to expect and the options you have.
Understanding the ins and outs of a home-based business insurance policy can be daunting. But, that’s when an experienced, licensed broker can simplify the process and answer questions to ensure you are adequately protected.
Don’t leave it to chance or overlook the necessity to protect yourself with a home-based business insurance policy as part of your overall risk management strategy.
Zensurance is Canada’s leading digital commercial insurance brokerage, providing an online platform to help find the best insurance quotes for your business. Our mission is to empower small businesses across Canada to thrive by offering an honest, simplified, and modern approach to insurance. Follow us on Twitter, Instagram, and LinkedIn.