What is The Difference Between Home-Based Business Insurance and Homeowner’s Insurance?

Will your home insurance cover you if something happens while carrying out operations for your home-based business? When do you need to purchase a home-based small business insurance endorsement? Or do you need a full, separate insurance policy for your business? Where do the two policies overlap?

To put it simply, these two policies – that is, home insurance and home-based business insurance – are both designed to protect your assets (one business and one personal) and there may be some overlap, but traditionally, home insurance companies will not insure business property. The same is true for the opposite: a business insurance provider will not provide coverage for personal items. If you live at home but run a business out of your personal property, you’ll need to have homeowner’s insurance for your property and liability in addition to a home-based business insurance endorsement or separate policy.

Let’s explore the differences between homeowners’ and home-based business insurance in Ontario.

What is home insurance?

Home insurance is a personal lines insurance policy designed to protect you, your family, and your home against the unexpected. Home insurance is something of an umbrella term that is used to describe any residential property insurance, whether you live in a stick-built home, an apartment, or a condo. Your coverage may include the physical property (or just your belongings, if you have tenant insurance) as well as if a third-party, such as a guest or a stranger, made a claim against you alleging bodily injury or property damage while on your premises or due to your actions anywhere in the world.

You’ll have to acquire home insurance if you have a mortgage. Even if you don’t, it’s still highly recommended, as it protects your liability against third-party claims, and it can help you cover the cost of repairs or rebuilding if something were to happen, such as a fire, a break-in attempt, etc.

Home insurance can extend to some business property. Say you regularly worked at an office, but today you were working from home to look after your child while they were sick. If you spilled coffee on your work laptop as you got up to head to the kitchen, your home insurance might cover that. On the other hand, if you ran a daycare out of home and one of the children you looked after left a sizeable dent in your bathroom wall, any claim you’d make to your home insurance provider would likely be denied.

What is home-based business insurance in Ontario?

Home-based business insurance is separate coverage entirely. It offers wider coverage that can extend to start-up businesses or businesses that require a lot of furniture, equipment, a sizeable portion of your house, stock, merchandise, and even operating losses, if the loss that occurs causes an interruption in your business activities. An all-encompassing policy for home-based business insurance in Ontario can also cover your third-party liability, and even privacy breaches for your sensitive data. If you offer a professional advice or services as part of your business operations, you may also add errors and omissions (or professional liability insurance) to the list.

The following coverages are needed by most business, even those that operate out of your home, and will not otherwise be covered by your home insurance:

• General Liability: If someone was injured at your business/property or as a result of a service or product you sell, or their property was damaged, the liability portion of your home-based business insurance in Ontario would cover the resulting costs, including legal fees.
• Tools: If your home-based business utilizes tools to do work, you can get coverage for those under a home-based business insurance policy. This is especially helpful if you store tools at home between jobs. You may even be able to purchase a transit floater to cover any items you have that are being transported.
• Cyber: Cyber insurance is gaining importance, due to the fact that we spend so much of our time and our efforts into the digital portions of our business. Home-based businesses will especially benefit from this coverage, as home networks may not be as secure as networks in public offices. This insurance protects your business against the resulting costs of data breaches or ransomware attacks.
• Inventory: Any business property stored at your home can be covered by a home-based business insurance policy. If your business was devastated by attempted or actual theft, fire, or even flooding, the property portion of your insurance would help to cover the cost of replacing or repairing your workspace and inventory.

What is a home-based business insurance endorsement?

There’s a difference between a home-based business insurance endorsement and separate home-based business insurance. In Ontario, the scale of your business may dictate which option you need. You can also work with an insurance broker, like one of Bullfrog’s representatives, to help you decide.

A home-based business insurance endorsement is a low-cost alternative to an all-encompassing policy and it’s an ideal choice for a self-employed worker operating from home or a small business (like an e-commerce website) that functions out of a private residence. This coverage will usually be limited to between $10,000 to $50,000 in coverage for business property but will have higher limits for liability arising from business use of the premises. Work with a broker to determine adequate limits.

Which do you need?

You’ll always need home insurance, even if it isn’t mandatory in your situation. Some mortgage lenders will require you to carry home insurance, and some landlords will ask that tenants provide proof of tenant insurance when signing their lease.

If you work from home occasionally, you probably won’t need to make any serious revisions to your coverage or be required to purchase a separate standalone policy. That being said, if you make a habit of storing business equipment at home, working from home or having clients visit your home, or you’ve begun the work of initiating a startup from home, it might be time to discuss with your broker about the possibility of acquiring a home-based business insurance endorsement or policy. Business insurance in Ontario helps to protect your livelihood – you wouldn’t want your hard work going to waste.

Start the conversation with a Bullfrog insurance representative today, or fill out a form for a free quote.