As mentioned in the section regarding Commercial Insurance, due to the increased minimum policy premium for commercial policies, coupled with the increased frequency with which home based business’s are being set up, the insurance industry has addressed this with a Home Based Business Endorsement (or similar title, depending on the carrier).
What this means is that many small businesses coverage can be added to or extended from your home insurance policy, provided they are being run primary from your home premises. Up until fairly recently, most home policies either excluded coverage altogether for any business use of the premises, or allowed a very restricted use and same was with respect to physical damage coverage of the premises only, i.e., NO LIABILITY COVERAGE WAS INCLUDED. Coverage for on premises only was available for an additional premium on property and liability under certain circumstances and for specific low hazard risks, however, this was not always broad enough coverage for many business who really needed off premises liability and/or property coverage.
As well, there are other business coverages, such as Business Interruption, Extra Expense, Accounts Receivable and Valuable Papers which must carry specific coverage to be insured.
Coverage as extensions to home insurance policies was never intended to take the place of proper commercial business insurance for major primary commercial enterprises, rather it is intended for small or part-time operations which are based primarily on home premises. An application requiring that you provide details of the business run from home is usually required, so that a specific eligibility criteria can be met. Common questions are: gross annual receipts for the operation, number of employees, history or related business experience, use or manufacturing of hazardous or flammable substances, claims experience, territory of sales, related or other businesses under same name or at same premises, or any other criteria each insurance carrier may find appropriate or necessary.
Types of Coverage:
Some of the more common types of coverage which can be purchased are:
- Business Property on Premises (various limits)
- Business Property off Premises (various limits)
- Accounts Receivable
- Business Interruption
- Extra Expenses
- Valuable Papers
- Liability Coverage
- Advertising Injury Liability
- Theft of Business Money
There is no standard policy wording for Home Based Business coverage as each carrier has designed their own, based upon the coverages they wish to offer or feel would best suit their customers. So it is most important that you review the coverage offered to ensure it meets your business’s needs, especially if you are intending to cancel an independent business package and replace it with something added to your home insurance. In many cases, your independent business policy is broader in scope, especially if it is on a “package” (see the Commercial Insurance section of this Web Site). Some areas to keep in mind are:
- Territorial Limits (Canada only?)
- Professional Liability Excluded
- Foreign Exposures Excluded
- Selling/Repackaging Under Own Label
- Special Contracts/Clauses Not Usually Allowed
- Deductible Change to Home Policy