COVID-19 led to many more people starting small businesses from home, often as a side hustle.
But even a micro business can affect whether your current insurance policy is valid. So, what kind of insurance may you need to run a business from home?
We’ll explore that. But first, it’s time to check what may be covered by your existing policy.
Check whether your home-based business is covered by your existing policy
If you operate a home-based business, it’s crucial to check whether your insurance policies cover it you if you need to make a claim. In most cases, a home and contents policy will not provide cover for a business, no matter how small that business may be.
Steadfast Technical Broking Manager, Annette O’Brien says it’s important to check the fine print in your policy.
“If you have any doubts, contact your insurance broker who will be able to assess both the type of business you’re running and your individual needs, to advise on the best policy for you,” she says.
“The Insurance Council of Australia has made it very clear that it’s important to be honest with your insurer if you conduct a business at your home”
One thing to be aware of she adds, is that in some cases, if you only have home and contents insurance, and then make an inquiry about coverage for a home business, you may find your existing policy may be cancelled.
“In one situation, a person based in Canberra who was running a small filmmaking business became concerned when he heard about policies being cancelled if the business was run from home,” O’Brien says. “He rang his insurer and was shocked when they cancelled the policy on the spot without any explanation.”
It is worthy to note that insurance companies cannot cancel policies on the spot. They need to provide an explanation to the policyholder if they intend to cancel a policy or decline a request for insurance cover because the business activity is undertaken from home.
What if you haven’t declared your home-based business?
If you haven’t declared your home-run business to your insurer, then you need to do it immediately, says O’Brien. “If your ABN is registered under your current address, then you should check the wording of your insurance policy to see if there is any cover for a home business – which is generally unlikely,” she says.
“Before you contact your insurance company, you can seek the advice of an insurance broker who can provide guidance around the best policy for your needs.”
It is important for the insurer to be aware of your circumstances as there are severe consequences for non-disclosure or misrepresentation, no matter how unintentional your actions are.
“You should also be aware that if you deliberately conceal from the insurer that you are running a business from home, it could constitute fraud, the consequences of which are very serious,” O’Brien says.
“The Insurance Council of Australia has made it very clear that it’s important to be honest with your insurer if you conduct a business at your home.”
What insurances does a home-based business need?
O’Brien says there is a number of common insurance mistakes people make when running a business from home. Most of them involve people not thinking about the type of insurance they may need. “And when they do,” she says, “they’re unsure of what items to include.”
In some cases, you may be able to extend your existing home and contents policy to cover your office equipment, such as your laptop. However, it is more likely you may need to take out separate business-specific insurance policies.
Business insurance policies can include:
- Public liability insurance (this is very important if you have customers or suppliers visiting your home);
- Business interruption insurance;
- Accidental injury insurance;
- Income protection;
- Money insurance;
- General property insurance;
- Machinery breakdown insurance; and
- Tax audit insurance.
Do you have questions about insurance for running a business from home? Talk to your Insurance Adviser today.
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