Do You Need Insurance For Your Home-Based Business?

There are many reasons that lead people to make the decision to run a business out of their home, but it usually comes down to just two things - time and money. Some people choose to operate a home-based business because it is cost effective since you don’t have to commute and pay for gas, plus you can save a lot of money on overhead costs like office space rental and office furniture. For other business entrepreneurs, having flexibility around their working hours and not having to hear the noise and distraction of an office setting is the reason they run their business from home. But what about insurance for your home-based business? Are you not covered under your home insurance policy and do you need to disclose your home-based business to your insurance broker? In this blog we will answer the question whether your home-based business needs business insurance in Canada?

Small Businesses In Canada: Statistics

According to the Government of Canada, a small business is an establishment that has 1 to 99 paid employees and it may be surprising to some just how important small businesses are for the Canadian economy. To make this point, consider the following businesses statistics form December 2021:

There were a total of 1.21 million employer businesses in Canada.
1.19 million, or 97.9 % of all businesses were small businesses.
437,891, or 97.7% of small businesses in Ontario were small businesses.
22,700, or 1.9% were medium-sized businesses.
2,868, 0.2% were large businesses.

As you can see from the above figures, small businesses are the backbone of the Canadian economy and many of them operate from their homes which makes home-based business insurance a necessity for many people. If you are running or planning to operate a home-based business, it is a good idea for you to consider home-based business insurance so that you and your property are properly covered without affecting your home insurance policy.

What Is Home-Based Business Insurance?

Home-based business insurance is an insurance policy designed to pay out for property damage, injuries related to the business, and for all other employee injuries and lawsuits.

An example of an injury related to the business would be if a client walked up the stairs of your home and fell down suffering some form of physical injury.

In most cases, home-based businesses need business insurance for the following reasons:

Unexpected risks, such flooding, fire, vandalism, and theft where inventory is damaged or stolen.
Instances where a client identifies an error in the work and then proceeds to file a costly lawsuit against the home-based business. In Canada, faulty work lawsuits cost small businesses an average of $14,000.
Unexpected risks such as fire, flood, or mechanical breakdown which damages essential business equipment. Home-based business insurance is key in this scenario as manufacturer warranties or a home insurance policy might not cover the damages.
Unexpected injuries to a visitor on the property of the home-based business, such as a slip and fall injury. In this scenario, having home-based business insurance is critical since a home insurance policy may not protect you from a pending lawsuit.

Home-Based Business Insurance Cost

If you are operating a business from home, you should be prepared to pay $25-$50 as an add-on to your home insurance policy. Having this coverage will extend your basic liabilities and ensure that your office equipment and essential business equipment is properly protected.

Speak To Your Insurance Broker

It is always a good idea to speak with your insurance broker before you decide to operate a home-based business from your property. Failure to do so may result in you having future insurance claims denied by your insurer, or worse, it may result in your home insurance policy being voided completely.