As much as home-based businesses wish to prosper, they must learn to figuratively cover their bases to avoid financial pitfalls. Entrepreneurs running a business out of their place of residence need to understand the difference between home insurance and business insurance in order to get the best coverage possible. In partnership with Intact Insurance, we explain why home-based business owners should acquire business insurance.
According to the Insurance Bureau of Canada, home insurance “offers a small coverage limit for books, tools and instruments necessary for a business, profession or occupation.” Essentially just the bare bones of your enterprise would be covered.
Depending on policies, home-based business insurance can be added as an extension of home insurance. It can cover business property up to $50,000, as well as liability arising from the use of the premises.
To cover all the bases, business insurance offers more comprehensive and flexible coverage that extends to all aspects of your business such as furniture, tools, stock, data breaches or interruptions which might result from something like a power outage in your residence.
All in all, home insurance for a home-based business is somewhat rudimentary compared to business insurance which offers more options for coverage and protection.
Each home-based business is unique. A small operation which sporadically deals face-to-face with customers is obviously quite different from a beauty salon operating in the basement of one’s home. A customer could arrive at your residence and have a bad fall, meaning either you or your business would be held liable and possibly take a hefty financial haircut. This would be an instance where commercial general liability coverage would be a saving grace, as home insurance could not cover such cases of liability.
Another thing to consider is professional liability insurance, also known as errors and omissions insurance. This covers you in the event your business is sued for negligence or providing information which caused financial loss to a client or client’s business. If a suit is brought against you for damages covered by your insurance policy, this protection would cover the legal fees for your defence, whether or not you’re liable. Professionals who are likely to consider errors and omissions insurance are real estate agents, personal trainers, chiropractors, lawyers and accountants to name a few. After all, a business should try to woo customers, not be sued by them.
Every business has the need to protect itself against liability and property loss; it’s just a matter of how much. The coverage of a home insurance policy might be a fraction of what business insurance could offer. But you shouldn’t forego any coverage altogether. Furthermore, if you do not have business insurance you could be held personally responsible in case of a lawsuit.
In the end, having the right insurance is critical to the growth and success of your small business. It’s always a good idea to establish an optimal policy before leaping into the unknown.
Source: Huffington Post