You’ve decided to follow your instinct and become an independent worker. You’ve invested your time and money to make your dream a reality. After several weeks of planning, your business is finally up and running… from your home! You’ve notified your clients, your suppliers — you’ve thought of everything… well, almost everything. Have you called your insurance broker to communicate this change to him?
You should know that in case of a loss, not having reported your business to the insurer could invalidate your claim. What does “business” refer to? Any continuous or regular pursuit undertaken for financial gain including a trade, profession or occupation. If you’re a hairdresser, an accountant, a interior decorator and you welcome your clients into your home a few evenings a week to offer them personalized services, your broker must be made aware of this. He will ensure that your dream is properly insured in case you find yourself in a pickle.
For starters, you should remember that the home insurance contract is comprised of two sections. The first one is property insurance. This section included the coverages, risks covered, property excluded, common exclusions and settlement options. The second one is liability. Having a business at home can have an important impact on each of these sections.
This section covers your dwelling building, detached private structures and personal property. It also insures any additional living expense or fair rental value loss incurred by you if an insured peril makes your dwelling or part of the dwelling unfit for occupancy.
When talking about home-based business, it is important to mention the personal property coverage for your contents. Some classes of items are subject to limitations, such as books, tools, instruments, clothing, goods and other property pertaining to a business. In case of a loss to personal property items, you must be aware that insurance will not pay more than the limit stated in your contract. If you must travel and bring your items with you, your limitation could be even lower. Make sure your coverage limit is enough to cover the actual value of the business items you have.
The home insurance policy also includes common exclusions, such as business purposes known to the Insured but undeclared. In short, your insurer could refuse to pay for your loss or reduce the payment amount if he was not aware of the presence of your business, whether the claim or not the claim has anything to do with it. Samples, goods and other property at any fairground, exhibition or exposition for the purpose of exhibition or sale are excluded from your insurance contract.
This section applies to your legal liability for unintentional bodily injury to others or damage to their property arising out of your premises or your personal actions. It also includes voluntary medical and funeral payments and voluntary payments for damage to property.
In the definition of “business”, we mention that you are insured against the claims arising out of the use of part of the dwelling building or private detached structures by you for business. However, it is once again stated that the insurer must be made aware of the business.
For example, if the client gets hurt at your dwelling, you could get sued. And if your insurer was not informed of your home-based business, he could refuse to represent you.
Depending on the type of business you are operating, we can advise you. You don’t necessarily need a commercial insurance policy to cover your personal property and your work-related operations. This will depend of the size of your business and the insurer’s acceptance or your insurance needs.
You don’t have much in terms of personal property because all you do, for instance, is bookkeeping for your clients? This still doesn’t mean that you are completely safe. You could be sued for errors and omissions. This type of situation could be avoided through professional liability insurance.
Since you now have a better understanding of the risks you face by not advising your broker of any chance pertaining to the use and occupancy of your dwelling, don’t take any chances and contact your Lareau broker!