Will your home insurance cover working from home or having a home business?

It’s been more than a month since Canada was put under lockdown in a bid to flatten the curve. Working from home has become the new norm, with millions of Canadians practising self-isolation. While the economic slowdown has resulted in major layoffs across various business sectors, it has also led to a rise in working from home, and home-based businesses. 

One way or another, COVID-19 has us managing our professional lives from home. During these unprecedented times, a lot of people have the same question: does my home insurance cover working from home and home-based businesses? To answer this question, we need to first look at what basic home insurance coverage entails:

What does a basic home insurance policy cover?

A basic home insurance policy protects:

• The interiors and exteriors of your house from damages and vandalism 
• Your household possessions, such as electronic appliances, furniture, jewelry (up to a certain dollar amount), cellphones, etc., from theft, fire, flooding, or other damages
• You from liability in case of accidents inside the house that cause physical harm to another person

But how does home insurance coverage change if you’re working from home or running a home-based business? 

Working from home

If you’re working from home temporarily due to the new coronavirus outbreak, your company will probably provide you with the basic equipment needed to do your job, such as a company laptop, desktop monitor, and even furniture in some cases.

Generally speaking, company-owned equipment is covered under your employer’s commercial insurance policy. In this case, the employee working from home doesn't need to add extra coverage for business equipment to his/her existing home insurance policy. 

"If individuals are working from home temporarily due to the COVID-19 lockdown, there is no impact on their property insurance,” says Elektra Hilton, Director of Operations at insurance brokerage HUB Customer Central.

“It is not considered business use when a policyholder usually works in another location and is temporarily working from home. Nothing needs to be amended on the home policy and there is no additional premium charged." 

On rare occasions, an employee may use their personal equipment, such as a computer, to work from home. Most home insurance policies have an additional coverage cap for business property, which can vary anywhere between $2,000 to $5,000, depending on the insurance provider. In most cases, this coverage is enough to safeguard your work-related equipment. But it’s best to check with your insurance provider. 

Even though it’s not advisable to meet with people in person right now, your job might require you to do so. If that’s the case, then it’s important to opt for additional liability coverage because if people are visiting your home for professional reasons, the personal liability coverage offered by the basic home insurance policy will not be valid in the event of an accident and subsequent claim.

Home-based business

If you’ve lost your regular employment due to the coronavirus pandemic, and have decided to start a home-based business of your own, you need to start by registering your business. It’s advisable to opt for business coverage — either as an extension to your existing home insurance policy, or as a separate policy. 

According to Hilton, “Most home policies offer automatic coverage for business equipment in the home (i.e. laptop, monitors) for those individuals who are self-employed/own a home-based business. This coverage is for a few thousand dollars (typically $2,000 to $5,000, depending on the company and property package."

However, this basic business equipment coverage is not enough to safeguard a home-based business from public liabilities, professional indemnities, and more. That's why you need a business insurance policy, which includes the following coverages: 

• General Liability Coverage: This coverage would safeguard you from any kind of liabilities for physical or financial harm to others caused by your home-based business. For example, it can protect you from claims filed against you for an accident that injured a client or a customer while they were at your home for business purposes.
• Professional Indemnity Coverage: Also known as Errors and Omissions coverage, this protects you when a client or customer claims that your service, product, or advice was poor/negligent, and led to physical damages, emotional distress, or monetary losses. For example, if you’re a doctor running a private practice from home, this coverage protects you from claims of medical negligence that led to the death of a patient. 
• Damage to Business Property Coverage: Just like the home insurance policy that covers damages to the home and its possessions, this type of business coverage is essential to safeguard damages to business property. It protects business premises, equipment, inventory, finished products, etc. from fire, flooding, theft, and more. This coverage varies depending on the type of business you run, the type of equipment and raw materials you use, and where you conduct your business. If you’re running a home-based business, you’ll still need a home insurance policy to safeguard your personal possessions. 
• Business Interruption Coverage: This type of coverage ensures the continuity of your business income in case of losses incurred due to damages to the business premises, equipment, inventory, products, etc. For example, let’s say there’s a fire at your house. The business insurance provider would pay a sum for the loss of business that resulted from damages to your business property. 
• Employer Liability Coverage: If you hire someone as an employee or an intern to help you with your business, this coverage pays for any injuries that they might sustain while working for your business. 

Depending on the scale of your home-based business, you can choose to either add business coverage endorsements to your home insurance policy or secure a separate business insurance policy.

"Insurance companies often offer a home business extension on the policy that provides basic coverage at a reasonable cost within certain eligibility guidelines for home-based businesses,” says Hilton. “If higher limits or broader coverage are required, then a CGL (Commercial General Liability) policy may be required."  

In short, working from home doesn't impact your home insurance coverage. But you should get in touch with your insurance company, since it might offer a different policy for working from home arrangements. And, if you would like to start a home-based business, ensure that you opt for adequate coverage to safeguard your business from different types of damages, claims, and liabilities.