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Home Based Business Risk and Insurance Explained

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Now more than ever business operators are running their business from home, and with the top 4 reasons for having a home-based business being:

convenience and fewer overheads
a better work/life balance
no commuting times
freedom and ability to care for children

It's no wonder there are is a huge shift toward this trend. But, will your home insurance policy protect your home-based business?

In short, probably not. Unfortunately, many home business owners assume that their business activities, contents, or tools are covered under their home and contents insurance policy and this is rarely the care. The coverage offered by a home insurance policy is very limited for a business and you will need more specific insurance to protect you and your business appropriately.

In addition, home insurance policies are not designed to cover business liability, stock, or equipment leaving significant gaps in protection.

If your home-based business involves:

creating, supplying, or manufacturing something, or
your customers come to your home (for any business-related reason like collecting goods or appointments etc), or
your business equipment is specialist or 'chemical' in nature. Think...machinery and plant or chemicals stored at home for use in your mobile pool cleaning business, or
you are storing your business retail stock at home, or
local council or government requires you have public liability in place,

a home and contents insurance policy won't protect you and your business in most circumstances.

What insurance should you consider for your home-based business?

This will depend on your business activities and assets. Below are a few of the common insurance covers that you might want to investigate for your business. Most can be combined under a Business Insurance Policy a.k.a a 'Biz Pack' and while the list is not exhaustive its a good place to start.

Public Liability

Public Liability insurance covers you for the small but significant risk of someone being injured on your property when it relates to your business activities. Think... someone tripping over an extension cord in your office during an appointment or slipping over on a wet driveway when they arrive to collect their order. Your business could be at risk of an expensive civil lawsuit and a home insurance policy is not designed to cover customers and suppliers visiting your home for business purposes.

Management Liability Insurance

Management Liability insurance is designed to provide protection to both the business and its directors or officers for claims of wrongful acts in the management of the business.

Details Get Quote

Business Insurance

A business insurance pack can provide cover for your business premises and contents, against loss, damage, theft or financial loss from an insured interruption to the business.

Details Get Quote

Business Package

Purchase up to six products under one Business Insurance Package.

Details Get a quote!

Product Liability

Do you manufacture, assemble or produce a product? Your home insurance policy won't cover you if your product injures someone. This one is a 'must have' cover if your make any products.

Property Damage and Theft

A business insurance policy can cover your stock, contents, and any specialist fit-out or equipment for damage and theft. Home insurance policies won't cover business inventory or equipment. In addition, cover for your stock will likely be excluded as well.

Business Interruption

A home insurance policy will not replace your lost income if your home is severely damaged, and you are unable to work from your home base for months while repairs are completed. If your home business is your livelihood this type of cover offers significant peace of mind and keeps your income flowing.

Portable Business Equipment

Do you visit your clients away from your home base and take a laptop, tablet, or another portable type of equipment with you? Your home insurance policy is unlikely to cover these business items while they are away from your home. If you rely on a piece of 'portable' equipment to earn a crust - you should consider covering it away from your home based on a business insurance policy.

Tax Investigation Costs

This little-known-about cover is ideal for home-based businesses. Home-based businesses have long since been a favorite target group of the ATO for audits. This cover can be purchased as a stand-alone policy but is often more economically priced if purchased within a business insurance policy and some insurers include it automatically - at no cost - within their business packs. It covers the cost associated with being audited by the ATO such as Accountant fees that relate to the audit.

Cyber and Data Breach Liability Cover

This class of insurance is fast becoming a worthy addition to the list of common insurance policies for any business owner to consider. If your business:

holds, collects or stores client, staff, and suppliers' financial or personal data on your computer or your cloud
take payment via your website or a POS or gateway payment system,
use cloud-based invoicing software, or
have an online store

your business network is at risk of a cyber-attack. In fact, if your business uses email - you are at risk.

Cyber risk isn't just about your systems or website being hacked; the risk of theft or unwelcome access to 3rd party information and data you might hold should be considered too. Under current legislation, business operators are legally responsible for ensuring that other people's data they might hold or have access to, is protected and secure on business devices, computers, and the cloud. The costs and penalties associated with this type of breach can be crippling for a micro business. (For more info on this type of policy and cyber risk - visit this page.)

Other business risks to consider

Workers Compensation is a must if you employ staff. You might also want to consider Management Liability insurance. this is particularly relevant if your business structure is that of a "sole trader" or a partnership. Visit this page for more info on this policy.

Commercial Car insurance is also a must if you are using your vehicle for business purposes - particularly if you are carrying goods or people for a fee.

Personal Accident and Sickness Insurance is worth a look too. If you are a sole trader or your business relies heavily on you to generate income - this type of policy can protect lost income if you are injured or become sick and can't work for a period. Many insurers now offer an Agreed Value policy for a nominated weekly income.

Professional Indemnity is a must if you are consulting or providing any advice. You may owe a 'duty of care' to another party if your business even dabbles in this area. More information on the type of insurance and why you might need it can be found here.

REEF INSURANCE BROKERS PO BOX 750 Bungalow Q 4870 Mob: 0473 007 606 hello@reefib.com.au reefib.com.au

The above information is very general in nature and should not be considered as personal advice, for a more tailored discussion about your circumstances please call us for a chat.

business insurance

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.

Reef Insurance Brokers Cairns and Tablelands, ABN 48646410335, AFSL 327131