What insurance do I need for a home-based business?

Many Canadians run businesses from their homes these days – whether it's a full-time gig employing more than one person or a hobby turned part-time job in the hopes of making some extra money on the side. Do you know if your home-based business is covered by your homeowner's insurance policy?

Homeowner Insurance has limits

If you're running a small business out of your home – operated by one or two people – you will likely need more property and/or liability insurance than is provided in a typical homeowner's policy.

Most home insurance policies in Canada actually contain an exclusion for business use of any part of your home, unless that use is declared to the insurance company up front. That means there could be no coverage for your home itself or any of the contents if the insurance company discovers any business or commercial use of the premises. There are exceptions such as tutoring for kids and music lessons, which are permitted under some homeowner's policies. It is extremely important for you to discuss any business activities in your home with your insurance advisor and to fully understand the coverages and limitations of your home insurance policy.

Commercial Insurance doesn't have to be scary

Home-based business coverage is often available as an extension of your homeowner's insurance policy, but not always as only certain types of business are eligible. Those that are not eligible under an extension should obtain a separate commercial insurance policy to be properly covered.

In addition to liability and property insurance, you may also need one or more of the following, depending on the type of business you're running:

• Business Vehicle Insurance
• Loss of Business Income Insurance
• Crime Insurance
• Business Identity Theft Insurance
• Errors and Omissions Insurance (E&O)/Professional Liability Insurance
• Employment Practices Liability Insurance (EPLI)

If you have invested heavily in office equipment and business inventory, for instance, home-based business insurance is necessary, otherwise you will not be able to claim for these items under your homeowner's policy. With the proper insurance, your policy will cover these items both on and off the premises.

Final Thoughts

When looking to protect your greatest assets, yourself, and those around you, it's better to err on the side of caution. Be sure to let your insurance broker know if you're running a home-based business so your precise insurance needs can be determined to ensure that you're adequately covered.

Home insurance is a key requirement for your mortgage. The Auxilium Team is happy to provide you with a referral to our trusted partners for a consultation and quote.

Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.