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Why don’t insurers like businesses operating from the home?
Home Insurance
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Insurers may have concerns about businesses operating from the home for a variety of reasons:
- Increased risk: Businesses operating from the home may pose a higher risk to insurers compared to businesses operating from commercial premises. This is because home-based businesses often involve the storage and use of equipment, products, and chemicals. These alone can increase the risk of fire, theft, and other accidents that could potentially damage your home.
- Liability exposure: Home-based businesses may also increase the liability exposure of the homeowner. For example, if a customer is injured on the homeowner's property, the homeowner may then be held responsible for the injury, which could result in their personal assets being at risk for the use of compensation.
- Difficulty in assessing risk: Insurers may also find it difficult to assess the risks associated with home-based businesses, as the scope and type of business activities may not be well defined. This can make it very challenging for insurers to determine the appropriate level of coverage and premium for the business.
- Lack of fire protection and safety measures: Home-based businesses may lack the fire protection and safety measures that are typically required in commercial premises, such as fire alarms, sprinkler systems, and emergency exits.
To summarise the above risk factors, insurers may have concerns about businesses operating from the home due to the increased risk, liability exposure, difficulty in assessing the risk, and the lack of both fire and security measures.
Business owners who operate their business from home should carefully consider these factors and take appropriate measures to mitigate risk, such as purchasing business insurance and installing additional fire protection and security measures.
It is strongly recommended that all business owners consult their Insurance Broker or their Insurance Company before deciding to operate their business from the home.
Tenants of domestic homes should advise their real estate agent and landlord if they intend to operate a business from the property as this also poses a risk for the property owner and the tenants own contents insurance.
Always remember that all Insurance Companies have their own guidelines, and no two policies are ever the same.
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General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.
All information above has been provided by the author.
All information above has been provided by the author.
Abbie Wilson, National Insurance Brokers, ABN 22165146789, AFSL 233750
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