What insurance do I need when running a business from home?

As more people start working from home and running a home-based business, business insurance is becoming increasingly important. Working out of your home offers many benefits, but it also comes with potential risks that you must address if you want to protect yourself and your business.

In this blog, we'll look at when you might need insurance for a home-based business, and the types of cover you may consider. We'll also explore how much cover you should buy and how working from home can affect your standard home insurance policy.

Disclaimer: Hiscox is not an insurance expert, and you should consider seeking advice from an experienced insurance broker who can give professional advice, assess your needs and provide tailored protection for your business.

Do I need insurance if I run my business from home?

Operating a business out of your home can save you money and help you work more productively, but there are risks associated with it as well.

Depending on the type of insurance you choose, your business insurance could cover things like property damage or office equipment breaking down, as well as liability protection for accidents that occur on your premises.

Business insurance is particularly important if you have employees working from your home office, as your existing homeowners' policy may not cover them.

What type of insurance should I consider for my home-based business?

As a home-based business owner, there are a few different types of insurance to think about. Some you must have by law, while others aren't compulsory but are still really important.

Many insurance providers offer business insurance products for home-based businesses (sometimes called work from home insurance, or working from home insurance) that allow you to bundle together the various types of cover most relevant to your business. Here are the main types of insurance available to home-based businesses.

Professional indemnity insurance

Also called professional liability insurance, this type of cover can protect you from financial loss if someone makes a claim against you because you've supplied negligent or inadequate work.

This type of cover is particularly important if you provide a professional service (for example, if you're an accountant, an architect or a consultant). Someone might claim against you because you've:

• made a mistake or an omission

• been negligent

• breached confidentiality, or

• given advice that has caused your client to lose money

Professional indemnity insurance can protect you from the legal costs involved in defending claims and from any compensation a court awards the claimant.

Public liability insurance

This cover can protect you financially if a member of the public or someone representing another business suffers an injury on your property as a result of your business activities. (Note: It does not cover claims made by employees.)

As a result, if you have customers, clients or business partners who visit your home or work premises, or if you visit their premises to conduct business, you should consider public liability insurance.

For example, if a client tripped and fell at your home while visiting you for a meeting, they would claim against your public liability policy. Or, if you were a tradesperson and you accidentally broke a client's window, or a visitor to the client's home tripped over your toolkit, they might claim against your public liability insurance.

Employers' liability insurance

If you employ staff, the law says you must have employers' liability insurance. It protects your employees from any injury, illness or disease sustained as a result of the work they conducted for your business.

If an employee makes a claim against your business because of an injury they've suffered in the workplace, or if they claim in the future due to an illness resulting from their work while you employed them, the claim is made against the employers' liability insurance policy that was in place at the time.

There are a few exceptions. For example, you're exempt if:

• you're a family business only employing close family members, and not set up as a limited company

• you're the company's only employee, you own the business, and you own more than 50% of the shares in the business

Otherwise, your business must have it. Learn more about the exemptions

This applies to home-based business workers, too. If you control when, where and how somebody works for you and you're responsible for their actions, you must have an employers' liability policy in place.

This applies whether you deduct national insurance contributions and income tax from a salary you pay to someone, or they volunteer their services.

And remember: You must clearly display your certificate of employers' liability insurance wherever you employ people who are covered by the policy.

Office, contents and equipment insurance

If you have business premises where you keep lots of equipment, it makes sense to insure yourself against physical damage or theft. Office insurance can provide combined cover for both the building and its contents, which can include your home office.

Whether you've suffered a break-in and theft or a computer breakdown, office insurance can provide you the financial support for fixing or replacing equipment or repairing damage.

Cyber and data insurance

Cyber insurance is designed to protect your business from digital threats, including data breaches or malicious hacks. There are two main types of cover:

• First-party cyber insurance: Usually includes the cost of investigating an attack, recovering lost data and restoring systems, as well as the loss of business income as a result.

• Third-party cyber insurance: Helps with the costs of legal claims made against you (for example, if there are claims of a GDPR breach).

How much cover do I need?

Your level of cover all depends on what your business does and its size. If you're based at home only occasionally, a basic policy might be enough. However, if you're running a larger home-based business or using more sophisticated and expensive equipment, you may need more comprehensive cover.

With employers' liability insurance, the legal minimum is £5 million of cover. However, a lot of insurers offer £10 million cover as standard anyway.

When deciding how much insurance to buy, you must consider all aspects of your business so you can be sure you have adequate cover in place should something go wrong.

Does my home insurance policy cover running a business from home?

It's important that you're aware of the limits of your home insurance policy when it comes to working from home. While many policies will cover personal items and damage to the property, they don't always include business equipment.

Also, most standard house insurance policies are unlikely to cover you if you have regular business visitors or if you use your home for activities other than office work. Don't risk leaving yourself and your company vulnerable – make sure you understand what type of cover you need to protect yourself and your business.

Does my home insurance cover office and business equipment?

While most home insurance policies will protect your personal items and any property damage, they may not extend to business-related items. If you're running your business from home and have expensive or specialist equipment (a photocopier that you use for work, for example), you may need to buy extra cover.

If your policy has limits on how much it will cover for individual items, you should consider those limits when assessing your level of risk. Put simply, the more valuable or sophisticated your business equipment, the more likely it is you'll need specialist cover for office contents.

Will my home insurance cost more if I run my business from home?

It's true that running a business from home can increase the cost of your home insurance. This is because you may need extra protection for business-related items such as computer equipment, office furniture and other business items.

You may also need extra liability cover in case an employee or customer is injured on the premises. Furthermore, if your business has regular visitors coming to the property, or involves specific activities being carried out on the premises, you may need insurance cover for this too.

Ultimately, it all depends on the type of business you're running and the risks associated with it. One way to make sure your home insurance covers everything you need while running a home-based business is to speak to an experienced broker. They can assess your needs and provide you with a tailored policy.

Do I have to tell my insurer I run a business from home?

Yes, you must tell your insurance provider if you're running a business from home. If you don't, it could leave you and your business exposed to potential risks.

So they can determine whether you need extra insurance cover, your insurer will need to know at the very least:

• what type of work you're doing

• how many people are visiting the premises, and

• the type of activities taking place

If you don't let your insurance company know, you may be leaving yourself open to serious financial losses should an accident or incident occur on the property as a result of work-related activities.

Small business insurance with Hiscox

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Relevant resources

• What types of risks does my small business face?

• I'm starting a business: What insurance do I need?

• Insurance for self-employed people: Everything you need to know

Disclaimer: Our partner Hiscox wants to help your small business thrive. Its blog articles will contain lots of useful information relevant to your growing business. However, this information is not meant as professional advice and you must not treat it as such. To find out more on a subject we cover here, please seek professional assistance specific to your circumstances.