Take cover
If you work from home, check to see if your household insurance policy is up to the job. In most cases it isn't.
You work from home. Now picture this scenario: after some heavy rain your ceiling caves in, ruining your PC and making your office uninhabitable. About as likely as a meteor hitting the house?
OK then, try this: The person you employ to come in and keep your books, trips on a child's toy on their way up to the office. She breaks her leg, is off work for three months and sues you. Got your Employer's Liability covered though, haven't you?
| "It's easy to put insurance at the bottom of the pile, but if you've insured your house and car, surely it makes sense to protect the one thing that enables you to pay all the other bills?" |
These may seem like rare, improbable events, the sort that thousands of home workers bank on never occurring. Many rely on their household insurance and hope for the best - but these policies don't cover eventualities like business interruption or Employer's Liability.
The bottom line is - can you afford to be without your income for many weeks, when the unimaginable suddenly becomes the possible?
If you were working from home five years ago, you'd probably have been aware that your household insurance policy didn't provide cover for any home office equipment such as computers and faxes, let alone any other risks relating to running a business from home.
Today however almost the converse applies, with a plethora of policies on the market offering a whole range of covers for just about every eventuality. So what do you need when choosing an insurance policy to protect your home business?
Types of cover for the unthinkable
As a homeworker you'll need a policy that covers some or all of the following:
1. Buildings
This aspect of your policy covers the building itself. You must advise your insurers exactly what you are doing and get their approval. If they consider it in any way hazardous - if your business stores flammable materials or you cook commercially, for example - that may affect the premium.
2. Business contents
You'll need to cover the business contents of your office for fire, theft and so on. You'll also need All Risks Cover on laptops or mobile phones if you take them with you when you travel on business. You may be told that this can be done by simply extending an existing household policy. But remember, if you lose your computer, you'll also lose the information stored on it. You can insure this under Reinstatement of Data cover.
3. Premises
If your house catches fire or you face serious storm or flood damage, you may need to hire a temporary office to continue your work. Again, this is mainstream commercial insurance known as Increased Cost of Working. It is also classified as Business Interruption Insurance - which will pay for any additional expenses or loss of income that the business suffers as a result of a loss. Plenty of people are unaware that this cover exists and many combined home and business policies fail to provide it.
But don't mistake it for Income Protection, which is protection of your personal income against injury or illness (always a separate policy).
4. Employees and the Public
When you run a business you may incur several potential liabilities - whether to the public (visiting your clients or your clients coming to you), or to employees (if you need secretarial or other assistance with your work).
No business should ever operate without adequate Public Liability Insurance - the cover which protects you against your legal liability for any accidental injury to anyone, caused by you, or any damage you may cause to their property arising out of business activities (a must for trades like builders).
And you'll actually be breaking the law if you employ someone and don't have Employer's Liability Insurance - even if it's just paying a neighbour to come in and stuff envelopes.
5. Negligent advice
Anybody providing professional advice or services could be held liable for any mistakes they make, and with legal costs and awards rising all the time, just one mistake could prove costly enough to close a business. Professionals who should consider Professional Indemnity Insurance include accountants, solicitors, architects, translators, graphic designers and consultants.
6. Accidental damage
This is useful where you may accidentally drop your PC for example. Although most household policies cover this eventuality, the cover is immediately dropped once you remove the goods from home - like the laptop dropped in the airport lounge or the camera kicked on a shoot.
A matter of policy
Some policies cover the business only, leaving your household insurance undisturbed. Many homeworkers like this type of policy because it lets them keep business and personal life separate, and business insurance premiums are also tax deductible.
Other people prefer combined household and business policies. These can be cumbersome and time-consuming to arrange, but having one policy does mean having only one renewal date and avoids arguments between insurers in the event of a claim. Premiums can vary dramatically, depending on the cover you choose, your age, type of property, sums insured and postcode.
Avoiding the cowboys
Insurance companies often employ low paid telesales operators who work within strict guidelines. They like to pigeonhole you into commercial or private insurance and as a homeworker you're both, so may end up with the wrong advice. Also, insurance companies only sell their own product and may not have the flexible product to meet a homeworker's needs. Brokers on the other hand, have knowledge of a variety of products often at competitive prices.
The best way to find a broker who can meet your needs is to contact the British Insurance Brokers' Association or BIBA (tel: 0870 950 1790) which will put you into contact with a broker in your area. They will carry Professional Indemnity Insurance and if they slip up and you suffer a financial loss as result, a broker's PII policy will ensure that you receive compensation.
It's easy to put insurance at the bottom of the pile, but if you've insured your house and car, surely it makes sense to protect the one thing that enables you to pay all the other bills?