Working from home can be one of the greatest perks of launching your own business. It’s the perfect environment to meet your needs, and it’s affordable. However, you still need to make a small investment to prevent your dream office turning into a nightmare: home business insurance.
There are multiple types of this though, and it can be difficult to know which you need. So here, we’ll take a look at these types, and help you figure out which you need to keep your business safe.
Why you need insurance
Many people believe that, if they run a small-scale business from home, they don’t need to take out any special insurance — but this can quickly prove a very costly mistake. For starters, if you don’t inform your provider that you’re now working from home, you risk invalidating your existing policy. What’s more, standard home insurance is usually inadequate to protect the day-to-day running of a business. If things go wrong, you may end up facing crippling bills — just think what might happen if a client injures himself at your home office, or if valuable stock gets stolen from your garage.
Enter home business insurance, a set of policies that cover every facet of working from home. Because requirements vary enormously from one business to the next, depending on what you do, the size of your company and the sector you operate in, home business insurance is not a catch-all product. Instead, insurers usually offer flexible packages that allow you to pick and choose the type and level of cover that’s appropriate for you. So how can you work out what you need?
Which type of insurance do I need?
Employers’ liability insurance, and public liability insurance
The first step is to look at the law. If you employ someone — even a volunteer — you are legally required to have employers’ liability insurance. This ensures you can pay compensation if an employee gets ill or is injured as a result of working for you. The minimum coverage you must have is £5 million and the fines are hefty if you don’t take out the policy (up to £2,500 for each day that you’re uninsured). You must also make sure that you choose an authorised insurer for this and display your employers’ liability certificate clearly at your premises.
Of course, if you’re a sole trader, or don’t employ anyone, this won’t be relevant to you. However, if you ever have customers, suppliers or any other visitors come into your home office, or if you visit them at their premises, you’d do well to take out public liability insurance. This covers any legal expenses you may face and compensation you may have to pay if someone is hurt or suffers a damage to their belongings at your premises or because of something you do — for example, if a client falls down your slippery staircase or you accidentally damage a customer’s laptop while visiting them.
Another key policy that’s useful to many businesses is equipment insurance, which is specifically designed to cover the costs of repairing or replacing computers, printers, servers or even key office furniture that have been damaged or stolen. Where appropriate, insurance for stock, or for tools that are essential to your trade — whether light boxes or jewellery polishing motors — can often be wrapped up into a single business contents package. If you travel a lot (or simply like to work from cafes every now and again), it’s equally advisable to extend your policy to include portable equipment, such as laptops, tablets, mobile phones or digital cameras.
Product liability insurance
Depending on the nature of your business, you may also want to get insurance that helps you deal with specific issues deriving from the product or service you offer. If you sell anything tangible, for example, product liability insurance is absolutely essential. As the name implies, it covers you if a customer becomes ill, is hurt or experiences any harm after using one of your products.
Professional indemnity insurance
If you provide advice or professional services, you may want to get professional indemnity insurance. This kind of policy protects you if clients claim they suffered a damage as a result of mistakes you made, covering your legal expenses and, if necessary, compensation costs. A separate, special legal-expenses policy can shore up protection if you are ever involved in disputes with customers or suppliers.
Similarly, if your business involves taking a lot of cash or cheques, you may want to have a specific policy that covers you against theft of takings — whereas if you rely on online payments, handle a lot of customer data or are particularly vulnerable to hacking for whichever reason, you may require a specific cyber-crime policy.
Business interruption insurance
And, finally, whatever you do, you may want to take out business interruption insurance. This protects you from the drop in income you may experience if a major incident disrupts your business — for example, if you can’t access your home office for some time after a flood, or if you suffer an accident that prevents you from working. It’s a crucial policy to ensure your future peace of mind.
Though it’s important, home business insurance is only one part of the formation process. You’ll also need to register either as a sole trader or limited company, set up a business bank account, register for VAT — to name just a few. This can be overwhelming, so we’re here to help with the whole process. If you’re interested in finding out more, visit the register a limited company page for more information.